Today’s video reviews a Fade the Fear trade on Google following its botched AI rollout. This was a practice trade placed in my Phoenix Trading Lab last Thursday, Feb 9th, 2023.

Notes

I have a few specific patterns on the chart that I trade.

I have specific strategies I trade around those patterns.

Trader A: Bull Retracement

Trader B: Bull Retracement, Bull Breakout, Fade the Fear

Fade the Fear Trade

Setup: Oversold stock (blue-chip company), with high IV (expensive options).

My bet is that the fear is overblown, that the stock will not fall as far as is being priced-in.

Ideal outcome is stock rises. But I will use a strategy that wins even if the stock stagnates or falls, just not too far.

Partly a directional but, but mostly a volatility-based bet. I’m betting the volatility expectations are too high.

Strategy: Naked Put or Bull Put Spread

Target:

1. Ride to expiration and let the put/put spread expire worthless
2. Buy to close the naked put/put spread when you capture the majority of profit.

Trade Management:

1. Scale In to 2^nd or 3^rd tier per the usual guidelines
2. Exit if stock falls to short put strike
3. Allow assignment if you like the company
4. Roll the put out to the next month to maintain exposure if it’s ITM at expiration.

Make the case for Alphabet

1. Blue-chip stock
2. Already 45% off the highs (bear market has already come)
3. Beat-up following its underwhelming unveiling of its AI stuff. (-14% in two-days)
4. Sharp uptick in implied volatility. Demand for OTM puts ballooned.

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