loader image

Why I Don’t Waste Time Trading Options on ETFs

by | Sep 2, 2022

Markets got a welcomed bounce Friday morning after almost a solid week of volatile tape and horrendous options flow.

As I mentioned this past week and in the most recent Blitz Daily, this is a time for traders to be super selective with their plays… Because our mouse-clicking fingers can get us in a lot of trouble in a hurry in this environment.

Being selective has worked well for the New Money Crew strategies, including Wiretap Alerts

We closed out another set of winning trades — our fourth straight — to close out August with a perfect 12-for-12 record,* scoring gains with more downside bets on Advanced Micro Devices Inc. (Nasdaq: AMD), Affirm Holdings Inc. (Nasdaq: AFRM) and Norwegian Cruise Line Holdings Inc. (Nasdaq: NCLH).

Our insane hot streak has done wonders for our overall stats, pulling our average weighted return per trade up to 15.4% — including all winners and losers — and pushing our win rate over the hump to an incredible 70.3% since we launched the strategy — BANG!

Why ETFs and Options Plays Don’t Fit for My Style

When you’re winning as much as we have, it can be easy to forget just how nasty these past few days have been…

And when we see choppy conditions like this, it can be tempting for traders to look to diversified instruments like exchange-traded funds — ETFs — for options plays…

But the way I see it, there are better ways to use your time and money than wasting them on lousy ETF options plays…

Big Gains Need Big Moves

You’re not going to catch me playing around in ETF options chains for one simple reason… There generally isn’t a lot of money to be made.

ETFs have their place in investing… They pool certain types of securities together to reproduce the broader move in certain indexes, equities or commodities, just like Ark Invest CEO Cathie Wood does with growth stocks in her ARK Innovation ETF (NYSE Arca: ARKK).

Because they’re made up of so many different elements, even if one stock in the fund has a big move up or suddenly crashes, that ETF will move, but not nearly as much.

Maybe that makes sense if you’re investing for the long term and holding for months and years… But as you probably know, we’re traders here at New Money Crew, and those big moves and crashes are exactly what we’re after.

Why would we want to buy an options play in an ETF like the Financial Select Sector SPDR Fund (NYSE Arca: XLF) when we’re likely to see a more dramatic move out of one of the stocks in the fund, like Citigroup Inc. (NYSE: C) or Deutsche Bank AG (NYSE: DB)?

Check out the video and let’s talk about a few more reasons why I prefer to steer clear of ETF options plays.

P.S. I’ll never forget the day…

I was sitting down with a Nasdaq market statistician while he explained the calculations he used to determine bullish and bearish moves.

And what he said blew me away…

I couldn’t stop thinking about it, wanting to put what I learned into use in my OWN trading…

Fast forward four years later and I did it!

See What I Built Here

WRITTEN BY<br>Lance Ippolito

Lance Ippolito

What to read next

Have any questions? Contact Our Customer Service Team

Share via
Copy link