 Hey everyone, welcome to today's update. Today is Monday, February 24th, and what a Monday it has been in the market. Now we've still got, at the time of this recording, we've still got about an hour and 48 minutes to go before the bell rings, but the S&Ps are down 115, Dow down over 1,000, Nasdaq down 381, and the Russell down 55, oil is down over 4%, Natty Gas down three, but I'm sure you all knew that already. So let's talk about this market. Obviously the media is looking at it from a standpoint of the effect of the coronavirus and how that's gonna impact companies, which I've really been thinking that that's the case for a while, but why is the market just now tanking today? What is it? And you wanna be careful about listening to the media, first of all. This could be no more than just some profit taking opportunity and using the coronavirus as an excuse. Now, do I think the shutdown of a lot of these companies overseas does have an effect on future profits and earnings and growth of these companies? Absolutely, but why today? That's my point. And so just keep in mind, this can happen at any time and so you've got to be ready and there are really two ways to protect yourself when it comes to situations like this. Number one, you've gotta keep your position size small. We talk about this all the time. Relative to your account size, you've got to keep your position size as small and that is the number one way to defend. You've got, when something like this happens, you've got to have cash in your account, not only to, you know, because margins can expand and buying power usage can expand, but also you've gotta have that cash on hand to take advantage of the opportunities because when something like this happens and implied volatility spikes, options get really expensive. That is the best time to be selling and if you don't have that cash available, then it puts you in a position where you're not gonna be able to benefit as much. So, and then short delta. Now, we talk about this a lot. We like to keep anywhere from one to one up to five to one and a ratio versus our theta when we beta weight it to spy and we're at about one and a half to one on that ratio. So, do we wish we would have had more? Yeah, but you always do in hindsight, right? After the fact, you always wish you had more. For example, if we look at delta airlines down 7% today, we actually had some short delta in delta airlines and we had a little bit shorter duration and unfortunately we got out Friday so we didn't even get to benefit from this big move. So, but you can't look at that in hindsight. You just have to understand, hey, you know, even on directional trades, we had the right position on but we are just a little bit off on our timing, right? And so, you've got to continually manage that portfolio delta and keep an eye and be comfortable with the amount that you have on. You know, if we look at our overall P and L in our account today, I mean, our account is down because we were in some positions that we had to get out of because of the massive move, just no way to defend them but our account's down less than 2%, you know? So, I mean, in a grand scheme of things more than anybody, I hate losing money but at the same time, you've got to understand on a massive move like this and to be down just a little bit because we had that short delta in place, that's what you've got to do ahead of time. Now, the question is can I go in and add short delta now? Well, yeah, I mean, yeah, you can but if we get a bounce, then that's gonna hurt you and the key thing is having that short delta on before the disaster happens, right? I mean, it's kind of like trying to buy insurance on your house after your house is on fire. You just, it doesn't really work that way, right? You've got to get it in place beforehand so when something like this happens, you are prepared. So, what are we looking at going forward? Well, a couple things. One, I mentioned this in Friday's video. I wanted to, if we saw some downs, I wanted to wait for a little bit of a bounce to add in some more short delta so we're still planning on that. So, you know, if tomorrow or the next day, you know, we do get a little bit of a bounce, we will be adding some short delta to our portfolio for a potential continuation to the downside. We may not get that bounce and so therefore we may not get as much short delta on but that's the market, that's trading and that's how you have to play the game. So, a couple other things I wanted to point out is if we look at, when you get a move like this, I'm gonna go to the market watch tab and I pulled up just the largest 100 stock. So, to do that, you just go to the watch list and you can pull up anything. I just went to the S&P 100, showing the largest 100 stocks and look at this. Of the 100 and one in this sample, 98 are declining. You know, we talk about when we do have a huge massive sell-off, everything becomes correlated and that's exactly what's happening. If we look at what's up today, one is Gilead, right? They will potentially have a solution to this coronavirus. So, they're up. The other one is Verizon for whatever reason, Verizon's up a little bit, but everything else is down. If we look at our kind of a watch list of individual stocks, I mean, look at this. Everything is down, down, down and down big. There's Gilead up 3%, but everything else is pretty much down in major multiples and so that's what happens in these markets. You know, obviously if we look at the future, gold is up and bonds are up and everything else is down and so you wanna have an understanding of these different asset classes and how they react in situations like this. Going back to the S&P, we'll just look at the ES futures. Now, we had a down move Thursday, we had a little down move Friday and then we had this massive sell-off today. But remember, this is all-time highs, guys. This is 33.97 and a half is the all-time high. If we look at a year-to-date chart, for example, the S&P is down 1% on the year. This is nothing, meaning if this thing really continues to unravel, we could be seeing, let me pull up a yearly chart, I mean, we could get down into 3,000, 2,900 and that would still not be that huge of a deal but it depends on the size of your positions and it depends on the positions that you have so keep that in mind. So what we do today, well, we took off some trades. You know, we had some Iron Duck and SPX, we took off, it hit our exit point. Roku hit our exit point. Google, Amazon hit our exit points and when you have a sell-off like this and you hit those exit points, it's critical that you follow that methodology and you get out of those trades when you set it up and you had a predetermined exit point before you set up the trade and that's exactly what we did and now we've gone in and we've repositioned some trades. For example, if we look at SPX, we added an Iron Duck in SPX and one with just 14 days to expiration and look at where our break-even is now. It's way down here. So yes and P would have to drop all the way down here to hit our break-even at this point and part of that is just because of the implied volatility spike, the options becoming much more expensive and allowing us to get further away and collecting a bigger credit and that's why it's so powerful to be able to sell options when you get that implied volatility spike but again, it goes back to keeping your position size small, keeping enough cash in place in your overall count to be able to take advantage of those opportunities. We also sold some premium in SPY. We did Iron Condor in SPY and if you had to even scrunch the screen down to the downside break-even, it's way down here. So look at that massive range we've got in SPY now that the options are inflated. Does that mean it can't get down there in our timeframe? No, absolutely it can but look at that huge range that we have and what we'll do is we will continue to add positions like this. When you get a spike like this, you don't wanna load the boat. Again, this goes back to keeping your position and your allocation small but we wanna start methodically jumping in. As price moves around, we'll spread out our ranges and our different price levels on different symbols. Now, like I said, everything went down so everything gets a little bit more correlated and because of that, one thing that we like to do when you have a major sell-off like this is we tend to gravitate more towards ETFs and indices because you've got those broad-based markets. You've got those a little bit more diversified asset classes as opposed to taking shots on individual stocks. Now, we'll still be trading individual stocks but that's after we have positions to a level that we want in these indices. We're gonna gravitate to the S&P first, to the Russell, to the NASDAQ and we're gonna be adding positions in those before jumping into individual stocks just because what you'll tend to see is a lot of times individual stocks will move a lot more. I mean, for example, the S&P's down 3.3%. There's a lot of stocks down five, six, 7%. If we scroll down this, Delta Airlines down 7%, lift Uber down 6%, restoration hardware down almost 8%. So some big movers Tesla down over 7% and so we are going to gravitate more towards indices while we have the opportunity and you've got to look at it that way. You've got to look at it. This is an opportunity but if you're not positioned correctly before then it almost feels like a detriment. It feels like you're just getting killed because you didn't have on that short Delta or your positions were too big or, or, or. So you've got to keep those things in check at all time because you just never know when these things are gonna happen. The other thing, lastly, I wanna point out is the VIX. So VIX futures are up 20% and the VIX index is up 47%, okay? So I had a lot of questions about this in the community. So I wanna address this. Remember, just like we teach in the two different, couple different VIX courses, the VIX options are tied to the VIX futures. And that's really important. It's a different animal than any other trading vehicle. So if we look at the VIX futures, for example, and we go to the trade tab, I'm in thinkorswim and you got to open this to futures and then all show all the different contracts. And what you'll see here is, you know, look at the VIX futures with two days. Well, it's trading at over $23. But if you go out in time until like the June, you know, that's still trading under 18 and a half. And so the options, if you have trades on in the VIX index using options, it's going to be tracking based on the relative month that you have. So the VIX futures out 114 days out in June is only at 18 and a half. Whereas the near-term VIX futures are trading 21, 23 and the 20 level, you know, those kinds of things. So very important stuff. I hope this is all helpful for you all. I won't be doing an update tomorrow afternoon because I will be traveling in the afternoon. I'll obviously be around all day doing alerts and all that good stuff. But no update tomorrow. Everybody have a great evening. Stay small, position size correctly and look for this continued opportunity. I hope everybody has a great one. Talk to you soon.