Dear Reader,
We’ve spent a lot of time over the last several weeks and months talking about the upcoming U.S. presidential election…
I’ve given you my top stocks if former President Trump wins… and my top stocks for a Harris victory on Tuesday…
And tomorrow, by popular demand – I’m going to give you my secret list of stocks that will go up no matter who wins.
That’s well and good, but…
What about the rest of your positions?
If you’re like me, you’ve got dozens of positions on right now – stocks, options, crypto…
And I’ve been saying for weeks that the election is going to create winners and losers.
Some of those losers might be in your portfolio right now. Yesterday, I gave you a lesson on how to turn your losing trades into winners with options…
And even though I expect markets to remain bullish through the end of the year, there are signs, as I told you on Monday, of a “Sell the News” style correction following the election.
Today, I’m going to give you a quick survival guide on how you can protect your trades just in case.
Let’s get to it…
Making Sense of the October Rally
October has a mixed reputation when it comes to the markets… It has a history of crashes, with the Panic of 1907, Black Tuesday (1929) and Black Monday all hitting during October.
But in recent decades we’ve seen October turn into a rebound month, with stocks coming off a typically weak September
This year, the SPY surged 2% from October 1 to October 18, when it closed at an all-time high of 584.59.
Since then, however, markets have given back about half of it, closing yesterday at 580.01
That early October rally was driven by multiple factors…
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Federal Reserve Policy: The 50-basis point rate cut signals a shift in monetary policy. With inflation easing and concerns about the labor market’s strength, a further quarter-point cut by year-end remains on the table.
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Presidential Election: Historically, markets tend to rally in the final quarter, influenced by expectations of holiday spending, corporate earnings, and end-of-year portfolio adjustments.
I suspect the election has traders holding their positions, waiting for clarity on who will lead the country over the next four years.
That could give us the “Sell the News” style correction I mentioned.
Not a crash – just a quick correction before moving higher.
But even a quick correction could cost you dearly.
So here’s how to protect your profits…
Protecting Options Profits with a Trailing Stop Strategy
If you’re holding profitable options trades, now is the time to consider a Trailing Stop order to secure your gains.
Unlike a traditional stop-loss, a trailing stop adjusts with the option’s price movements, allowing you to lock in profits dynamically.
Here’s How It Works:
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Set a Trailing Stop Percentage or Dollar Amount: Let’s say you’ve opened a call option at $4 and set a 25% trailing stop. If the option price rises to $6, your trailing stop would adjust to $4.50.
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Lock in Profits or Minimize Losses: If the option price falls back to $4.50, your position will close, preserving a portion of your gains and preventing a profitable trade from turning negative.
Trailing stops can be a powerful strategy to safeguard profits in volatile markets. Without one in place, the underlying asset could continue falling, taking your option’s value with it.
That’s all for today, but don’t forget…
Tomorrow, I’ve got a ton of stuff for you – a new edition of the podcast, our Friday Q&A, and the 3 stocks that will go up no matter who wins next Tuesday.
Good trading,
Tom Gentile
America’s Pattern Trader