After yesterday's insane turn-around I was not expecting the market to go up by another 2.24%. That's a 6.55% move from yesterday's low.
You read the headlines (which appear to be AI driven in more and more cases) and they say: "Dow climbs 800 points as investors weigh latest on Russia-Ukrain".
Hold on a moment!
Isn't the war, humanitarian crisis and continued threats supposed to create uncertainty, fear and further sell-off?
Investors and traders are better be super careful and not to be fooled by the upwards movement of the past two days.
What does that mean for option traders?
We have to watch and manage our capital reserve (we commonly refer to as buying power of bp) carefully and aim for 50%. In other words, if one has $10k to invest then it's best to have $5k sitting in cash and not get tempted by the seemingly tremendous opportunity that the high IVR across the board represents.