Closed my position on Tesla today. In January, I was up massively when I decided to double down. This mistake caused me to realize massive losses after a $150 reversal up this year. GG Musk. No Lambo for me this year!

Looking at this now, I truly can't believe I allowed myself to take this kind of losses. I tricked myself into believing it balanced out since I would have green days, but never this much. Options has honestly kinda ruined my life. I'm still happy but now these days that I'm pretty poor, if I wasn't so reckless with that 37k my life would be in a completely different place. I'm an electrical engineer and make over 100k a year but I still do reckless things like this.

Anyway see you guys at 9:30 for ITM puts

Amazon trades at 2.4 times sales, pretty much in line with the average S&P 500 company. Alphabet's price-to-sales ratio is 5.6, Apple's is 7.5 and Microsoft's is 11.7.

Nvidia's: 37.8.

This is one of many personal reasons I think it’s grossly overvalued. I wanna hear what people who think opposite have to say as well though.

Disclaimer: This is NOT financial advice. Everyone trades with different goals, on different time frames, and has a different risk tolerance. Trade your own account and DO NOT blindly follow others into a trade.

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What is Option Flow Trading?

Flow trading is my preferred style of trading. Simply put, you look at options trades that are being placed and use it to help make determinations about where a stock might be headed (or if it may stay range bound). You look at various calls, puts, the size of the trade, and the timeframe of the trade.

Option flow *can* (but like anything in life/trading, doesn't always) work if done correctly. Think about it- there are professionals with way better technology, way better research, way better algorithims than we will ever have access to. Lets say they have information that a certain stock will trade to XYZ price. Well, they can profit off of that by buying the underlying options- and that's what we follow. This is the "smart" money.

Just Follow the Flow?

Not blindly. Remember, options flow show us the order but NOT THE WHY. Yesterday someone posted about NVDA July $500C being bought. Great! But what if that trader is short 12,000 shares of NVDA? On a 0.06 delta trade, that's a perfect hedge. The reality is we do not know what the intention of the trade was. Maybe it was a long bet. We don't know.

Then What's the Point?

Like everything, option flow trading is a TOOL. Nothing more. Identify where the smart money is positioned, and incorporate the other techniques to select high probability trades with positive reward/risk ratios.

An Example of What I Look For:

Few days ago, I went long NFLX out of the money calls. Why? As I posted many times, the technical setup was superb. The stock was consolidating its gains

after a move up and ready for the next leg.

But why now?

They were buying longer dated calls for a few days. But yesterday I saw something very unusual. Someone came in and sold 1000x weekly $425 in the money puts for $27 each while the stock was at $397. Selling puts is a major bullish sign that someone thinks the stock is going to go higher, and go higher quick.

The next day we woke up to two street high price target upgrades. Hmmmmmm.

https://preview.redd.it/0ouli6yxb75b1.png?width=1515&format=png&auto=webp&v=enabled&s=13f477f92858d438e8586e3ff13b26cb7ed94f09

Example #2:

Yesterday I posted about buying into LLY Calls.

Lets look at the 4hr chart below:

https://preview.redd.it/ynz8zog4c75b1.png?width=828&format=png&auto=webp&v=enabled&s=941749b448630676b047d4427b09244ea9df53c2

This is exactly what I look for in a trade— the holy grail if you will.

1. All year the stock has had relative strength and has performed well. Winners keep winning.
2. Recently the stock has seen higher highs and higher lows
3. While in an uptrend, consolidating NEAR THE UPPER END OF THE RANGE, above all moving averages.
4. Gorgeous breakout pattern. Above $448ish - $450ish and it flies (but I want it to have a daily close above recent high of $454.95 to be confirmed).

——————

This is all great, but why now?

1. Last two days they started selling at the money puts showing their confidence that this breaks to the upside, or at least doesn’t drop

But we need a catalyst for the move!

Ah… yesterday was Biogen’s FDA meeting date. Biogen is a direct competitor but has a similar drug. If their drug gets approved, 99.9% chance Eli Lilly’s gets approved. FDA voted 6-0 yes. Great news. Great confidence.

So there’s your catalyst. Afterhours, Biogen stock shot up +10% on the news. LLY likely moves much higher next week.

IT DOESN'T ALWAYS WORK:

Let's look at the Boeing (BA) weekly chart.

https://preview.redd.it/ukeedlt7c75b1.png?width=1483&format=png&auto=webp&v=enabled&s=949329d53f68282734341da49b1ff7c0a523e309

This is one of the most beautiful bull flags I've ever seen. More often than not, bull flags DO resolve to the upside, hence the term bull, after the moving averages catch up to the price.

Well, on Friday, June 2, the "smart" money observed the same thing I did. They came in and bought a few million dollars worth of calls.

Yesterday (June 6th) BA got some negative news and the stock sold off -3%. Subsuquently, the "smart" money dumped all their calls for a 7-figure loss.

https://preview.redd.it/gz3uepj9c75b1.png?width=1514&format=png&auto=webp&v=enabled&s=8389db597489978201434624560ca2194f321ae2

Does this mean the stock won't go up? Who knows. What it means is this trader was betting on immediate upside in the stock based on the technical pattern and that did not happen. This trader capped his/losses and moved on.

What I Look For:

As previously stated, option flow trading IS NOT a holy grail; it's merely a tool.

1. Find a few stocks you like, learn how they trade, learn how the premiums move, study it. Become familiar with 10-15 names.
2. Find a few chart patterns you like and have success with. I know Yolo_sense is a "super duper mega breakout" guy. I love that pattern as well! It has a high success rate, moves quick, and often goes higher than you expect. I also love trading bull flag breakouts- I've had a lot of success with them, but doesn't mean it's for everyone. Find what works for you and stick to those 2 or 3 setups.
3. Then, after you've found a setup you believe in, look at what the "smart" money is doing. For anything OTHER THAN WEEKLIES (swing trading for a few days / weeks), I like to see multiple repeat orders into the same strike, same expiration, and I want to see the IV increasing. This shows the buyer wants to get in.

If you see a consistent bull setup, you see option flow that supports your thesis, you should take the trade.

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There's no way to backtest all this since that would be literally hundreds of millions of trades. However, in 2020 I started tracking my P/L in Excel. Using this method I've found that ~ 63% of the trades I take are profitable.

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I DO NOT HAVE ANY CONNECTION WITH THE FOLLOWING SERVICES BUT I HAVE USED THEM ALL IN THE PAST AND CAN VOUCH FOR THEM IF ANYONE WANTS TO LEARN THIS:

1. Black Box Stocks- great service. Great people who run this. They live stream the entire session and give commentary on what they look for, why, and how it works. I would recommend this for beginners.
2. Options Hawk- I used Joe's premium service for 6 months. Ultimately, there is too much information for my need, but he is le crem de le creme of the options flow world. Spend a week in his live chat studying market dynamics and flow with him and you will learn more than trading yourself for a year. Very expensive, but cannot vouch enough.
3. Cheddar Flow- This is just the one I use, but they're all the same. Just need some type of consolidated option flow platform to navigate all the trades. Once you know what you're looking for you don't need an expensive service.

NFA.

Palantir’s boss Alex Karp opposes the idea of a pause in artificial intelligence research, in contrast to an open letter from the Future of Life Institute signed by some of the biggest names in the tech industry.

The letter, which has garnered over 31,000 signatures including names like Tesla CEO Elon Musk and Apple co-founder Steve Wozniak, called for a pause on AI research on models larger than GPT-4, which powers tools such as ChatGPT.

More in the link..

https://www.cnbc.com/2023/06/09/tech-leaders-ai-pause-no-product-ready-palantir.html