“What has happened in the past will happen again and again”
– Jesse Livermore
Hello Tackle Traders! I am going to take a guess and say that most people today use some type of social media to connect with friends, family, and colleagues. A lot of businesses have also embraced the world of social media either with advertising and or having their own pages to promote their goods and services. The average person though uses his or her social media account to share photos, thoughts, jokes and the cat and kid videos. With all the good, bad and ugly of social media, I too share pics and thoughts often. The medium where I share the most is on Facebook, and on occasion, Instagram and I may share a tweet from time to time. Facebook, for now, seems to have gotten over their data mishap from a couple of months ago and is far off its lows of $150 per share and is now inching towards $185 a key resistance level. Of the upgrades Facebook has done over the years since I joined, I’d say my favorite is the memory feature that reminds users of what they’ve shared in recent years. I enjoy looking back to see how things have changed. It shocks me when I see moments that I think just happened the other day and come to the realization that it was a year or more ago.
This leads to this week’s blog. The title is a thought I shared on May 20, 2011. The post read, “What goes up must come down. Even gas prices”. The post was followed by a like and few comments from my friends who shared the same sentiment. At the time I was commuting 23.5 to 34 miles to work one way depending on which route had the least amount of traffic. That would equate to forty-five minutes to an hour fifteen of driving. In the DC area throw in rain, sunshine or snow and it’s a wrap! That added up to 287 miles a week commuting to work only. If I was to add the after-school activities, Saturday activities, and church on Sunday’s it’d be close to 400 miles a week. Therefore, you can see why I was praying for the gas prices to come down. Did I mention that the vehicle I was commuting with was a Yukon Denali that I had driven since 2005 and continued to drive until her untimely demise in 2016? We had a great run! Over 300,000 miles of commuting to work and road trips up and down the I-95 interstate but I digress.
When I saw this Facebook reminder, a few thoughts came to mind. The first thing I did was instantly cringe and beat myself up because I noticed my consumer mindset. Secondly, I quickly pulled up a chart of crude oil to see exactly where oil prices were back in May 2011 and thirdly I wished I had the financial education I have now because I could have done something about it rather than complain. It’s quite ironic because what’s been on the news lately besides the Royal Wedding is the increase in prices at the pump. History surely does repeat itself doesn’t it? I cannot help but think of the shoulda. woulda, coulda scenario from this simple comment I shared 7 years ago. What if I could have done something different? What was the cost of my ignorance? Well, I decided to travel back in time and see what I could have done had I been a trader. Below is a chart on USO an ETF for oil. You can also look at Crude Light /CL in the futures market. Futures are highly leveraged products and if you have experience trading futures great. I am going to use the USO ETF instead. Looking at this chart of USO the price was nearing $40. I couldn’t help but notice the price had gotten as high as $46 just a few days back so without even knowing, what had gone up was actually coming down. So knowing what I know now about trading and based on the types of accounts I had back then, what could I have done to take advantage of the dilemma I was in? I enrolled and started in my journey to becoming a trader in January 2015 so let’s pretend that if I had started my journey in January of 2011 that by May of that same year, I would have had enough education and confidence to have been trading covered calls on USO at the least. Therefore, in my IRA rather than mutual funds, I could have had some shares of USO and with those shares I would have sold call options against my shares to collect cash flow monthly (this is the covered call strategy). USO was in a range between $38 and $40 for the most part, so I will assume that I would have been at break even in terms of the price appreciation. Once USO broke support at $39, the next step would have been to buy put options on USO to hedge against the shares I was holding. After the KOD signal (Kiss of Death) then I would have increased my position on my PUT options to now create the famous V shape risk graph to profit on either side. With the pattern recognition that I learned in technical analysis for every lower high and lower low, higher high and higher low, double bottom, double top, cup and handle and everything else in-between I would have had the ability to take action on upward, downward and sideways trends all while bringing in cash flow every month for 7 years. Now I doubt I would have caught every movement or capture an entire trend but I guarantee the result would have been a lot better than a post on a social media. When I have the spare time I think I’ll back test this to see what the actual results would have been but for now I just wanted to address the consumer mindset aspect of it.
USO price near $40 per share
So now here we are, faced yet again with the prices of gas/oil going up. /CL futures are sitting $72 and USO at $14.67. How do you plan to offset the increase at the pump? Will /CL get back to the highs of $100? I don’t know but should it reach those levels again I have a solution that can I do for myself and share with anyone else. See we don’t know what we don’t know but once a solution to ones needs is given and one chooses to do nothing, they can no longer blame everybody and their mama for not taking action. As gas prices continue to go up I do know one thing, I won’t be crying at the pump. One because I do not have 287 miles of commuting plus my gas-guzzler is gone even although another one will take her place. Secondly, I now know how to generate cash flow from trading. Selling naked puts and covered calls on USO being the core strategies I am using as oil prices inch higher. Should it reverse again I’ll know what to do. It’s moments like this I count my blessings and say a little prayer.
Until next time traders,
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- Emily Muiruri, an Entrepreneur, Real Estate Agent and Business owner. Born and raised in Nairobi, Kenya before her family moved and settled in Maryland. She began her trading journey in January 2015 after 17 years of Property Management in the Self-Storage Industry. Emily uses different strategies to trades stocks, options and forex. Although still a student learning and enhancing her trading skills, she has strong desire to teach women to take control of their finances and become traders. Writing blogs is one of the ways she’s is looking to spread the word and get more women involved. Emily knows that with the right education and trading system women can be successful traders
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