The following is part 3 of a 4-part transcript of the “Equities – Risk Less, Make More” session at MTI’s Investment Leaders Summit event held on April 27, 2021. The session featured market experts Tyson Clayton and Chris Pulver, creators of the groundbreaking Equities on Demand training program. For more information, watch our Equities on Demand video or read Part 1, Part 2 and Part 4.
Clayton: I want to break down some of our different strategies where we’ve got the act of passive, short-term trading. Let’s talk about some of those, and then I want to kind of go in-depth. I like that you have the IWM up [on screen]. I want to go through them without having people’s heads spin, because if we’ve told them everything about the Master Blaster strategy, their heads would probably spin.
I’ll just share some ideas of what we’re looking for and [the reasons] why. But let’s run through some of the different styles of traders and how we can help them overcome obstacles by using these strategies.
Pulver: I thought we could start with IWM simply because we kind of “Pavlov-ed” the students for the last three weeks. We got them ready for this trade and all of a sudden we introduced it to them on Friday and [they’re] like, “Oh, we’ve been doing that for three weeks.”
That was actually pretty easy. So we did a little Mr. Miyagi-style [coaching] and we got this one ready for everybody last week. Everyone’s filled and we’re letting this trade run for a couple of months and it looks great, man. So, go ahead, Tyson. You can talk about what we’re doing, why we’re doing it.
Clayton: Yeah. Here’s a really important and verifiable and unchangeable nugget [of information] that I know of in the market.
“In fact, it’s probably the only guarantee that I know of in the market. Low levels of volatility are always followed by expansions in volatility and expansions are always followed by contractions.”
Every time, no matter what the market is, that’s the way the market works. Essentially, [the market] goes into imbalances and then it goes to equilibrium and then imbalances and then equilibrium. But what we want to do is know the environments we’re in right now.
Are we at an imbalance level, where volatility is just off the chains? If we are, then we can look for ways to generate more income by doing something called selling credit spreads, bear call spreads, bull put spreads, and iron condor type of trades. If we’re in a low volatility environment, that’s when we want to say, “Hey, let’s take advantage. The market is mispricing stocks.”
So what happens in the options market oftentimes is that the market makers are really smart [at establishing quotes for the bid and ask prices.] The floor traders and the market makers are some of the smartest people in the world that are trading in the markets. But they get it wrong sometimes, not often as you can tell. For example, tomorrow there are probably 60 companies that are releasing earnings and there’s only one play because most of the time the market makers get it right.
“Sometimes [the market makers] get it wrong and when they do, we can use historical movements [to take advantage.]”
There is no guarantee, but we can use what happens historically when this pattern takes place. When we get a tight range that will cause a squeeze in the market, [which is] what typically happens. And so in the IWM, we’re using what’s called an iron condor strategy.
It’s a longer term trade. I just want you guys to think about it in a way of a straddle strategy. Let’s just talk about the straddle. Essentially, we don’t care [about market direction]. Imagine trading based on news on the Forex when a big news event comes out. You don’t care whether it’s going to go up or whether it’s going to go down. You just want it to move.
Well, we have the technical indications that are happening right now on the IWM saying that the market is going to move. In fact, I promise you that the market is going to move. Now, the only question is whether it’s going to move in the timeframe that we’ve analyzed.
We believe that it’s going to move by June 4th. So we’re giving ourselves a little over a month for this trade to play out. Now, based on the technicals and what’s happening right now, we believe that the Russell Index is either going to move up to a $240 to $250 range or down to $207. 50.
We don’t care which direction it moves. I could care less where it moves, whether it moves up or down. But technically speaking, we want it to move by that date. Now, here’s what’s beautiful about this trade, Chris. If it doesn’t move up to that level or down to that level by that time, we’ll do what’s called rolling our positions.
Because as I mentioned, I promise you that the [price] move is going to happen. In fact, if the move doesn’t happen by June 4th, that actually gives us a larger expectation of even a bigger move, right? Because the longer the consolidation period, the more aggressive and violent the expansion. So what we’ll do if we have to manage this trade, which I don’t think we will, we’ll probably roll it out to September to give ourselves even more time and also go for much bigger [price] differences.
So we’ll be able to easily make up any losses that we might’ve taken. But again, I don’t expect to take a loss. We’ve got a month for this trade to play out. It’s already playing out decently with this rally we’re experiencing right now. Thing I love about this trade, Chris, is that I’ve gotten a lot of questions from students all the time.
“Hey Tyson, what are we going to do if the market crashes?” and “Hey, I heard from my buddy that drives for Uber that the market’s going to crash” and all this kind of stuff. And that’s great. In fact, I just got a message from one of the account reps last night and he’s an active trader.
He loves it. He’s in our Equities on Demand course. He’s watching everything we do. He mentioned that one of his buddies that he knows that’s in the [investment] business said, “Hey, they’re looking for a 30% correction within the stock market.” I said to him, “That could absolutely happen and maybe it will.” Here’s the deal.
“I don’t know if [a market correction] will happen. I don’t know, but I don’t care. The way I want to position our trades is in an agnostic, ‘I don’t care’ position and still make money.”
Type in a “yes.” If you like that. You can actually not care [which way the market goes] and still make money.
Yes, I can wake up in the market saying, “Aw man, the market tanked.” Now I do care because I have loved ones that are dependent on the market and I don’t want anybody to go through that [downturn]. Well, guys, that’s such a liberating, such a freeing place to be when we really don’t care what the market does.
Like in the example of the trade we’re in for tomorrow, Chris, we don’t care where it goes. We just want it to move. And that’s the beautiful thing about this trade right here. So here’s the nugget. Some of you might’ve missed it. Let me give you that nugget one more time. Chris has it written down on the screen.
And this [cycle] happens in every market. By the way, the strategy that we teach you in the Equities on Demand course is called the Master Blaster strategy. Once everybody gets to a level of comfort with this strategy, Chris, we’re going to show them how they can spin this into cryptocurrencies for X, all this [strategy] works in everything.
Levels of contraction and low volatility are always followed by expansions. But the issue with trading this type of strategy in Forex as an example is that I don’t know what direction the expansion is going to come.
Here’s another question to everybody. If I go long the Euro dollar, let’s say 120 and the price goes down to 119, what happens? I lost money. Right? Right. If it goes nowhere, I lost money. It’s a binary trade, it has to go up, which again is okay, because we’re good at analyzing technicals and that’s fine. But that’s what we try to avoid happening, Chris. Trading is already hard enough.
We try to take the equation of “Aw, man, we have to be right on direction.” What if we could eliminate that [requirement] from your trading ever again? What if you never had to worry about being right on direction ever again, and you could still make a lot of money? That’s really the question. Wouldn’t you agree, Chris?
Pulver: I would agree. I’ve got a good question here from Joey. Joey says, “I don’t have a minimum of $25K to open a margin account. So I can’t short the equities market.” You don’t need to have $25,000 to short the equities market. You can actually buy inverse ETFs. You don’t need to have $25,000, right? Yes, maybe you can’t trade on margin.
Maybe you can’t be a day trader because you have less than $25K, but there are instruments to trade. You can still buy an inverse ETF and trade it. So when the S&P drops, you can trade an inverse ETF that goes up like a stock. So there are so many options. It’s crazy.
Clayton: Well, how about this? Be bearish, but take a bullish position. Do deep out-of-the-money bull put spreads because probability tells us over the last 100 years, the market goes up. So whenever you’re trying to bet against the market, you’re betting against probability. So if you’re super bearish, be super bearish, but do what’s called deep out-of-the-money bull put spreads, and just look to collect income. But if the market falls, you still have a level of protection.
So you can be bearish and you can still make money if the market goes up. It’s so hard sometimes for students to really wrap their minds around that. “Wait a minute, Tyson. I was super bearish. The market went up and I made money. I don’t get how that’s possible.” It’s possible.
We do it every single week in our Power Play strategies. We have a way that we’re actually expecting the market to sell off first, to get us filled or to get into the trade. If it does sell off, we’re actually really happy.
And so yeah, we think it’s going to fall, but if it rallies up, we can make a lot of money too. And that’s such a great place to be. The reason I love this [system] is because I don’t like being wrong yet I know that in trading you have to condition yourself to be okay with being uncomfortable.
You have to condition yourself to be okay with taking losses and that’s counter intuitive to human nature. Right. It just is. We don’t like to lose anything. And that’s really counter intuitive. I’m a super competitive type of guy. I’m high level, high energy, and I’m just super competitive.
So it’s hard for me to be like, “Oh man, I lost.” And that sometimes can get in the way in my currency trading. But the thing I love about what we do in Equities on Demand is that we can lose yet still make money. I can say, “Hey, I was totally wrong on that trade direction. I know, but I made money in IWM.”
“I think we’re going to [market] highs, Chris. But you know what? I might be wrong and we might tank down. But I don’t care because I’m going to make money regardless of what happens.”
Pulver: Yeah. I mean, we don’t know if the IWM, the Russell Index’s going to lead the way for the S&P and the Dow Jones and the NASDAQ to follow along.
Maybe it’s a small cap stock that leads the way. Look, the S&P and the NASDAQ have just rallied 8% to 10%. The Dow Jones rallied 10% to 12%, since March’s low. So, there is a pullback that is technically very much overdue, right?
This is a fantastic week to be talking shop in Equities on Demand because we’ll discuss if we are going to just keep pushing along, through the Fed on Wednesday, through Biden potentially talking about tax reform or tax rates and capital gains this week.
Is it enough to say the market’s just going to ignore [obstacles], put the blinders on and just all power through? Let’s get through April, get through May and get to this pre-summer push. And then profit taking comes in by summer, and we see a sideways summer. Then we hit the reality of maybe August, September — the turbulence of usually September, October. Sure, maybe we’re four to five months away from an actual significant correction. We are going to see and talk about it. But again, it doesn’t matter.
“If this stock, if this IWN that we trade as an ETF, if this stock goes up or this ETF goes up, we’re going to make money. If it goes down, we’re going to make money. And so the margin for error that we have built into these trades is incredible.”
We can be absolutely spot on with direction and we can make a lot of money. We can be wrong in direction, and we can make decent amounts or a lot of money depending on how we position the trade. Or we can be totally wrong and we can lose a lot less than if we had to take a directional choice. And so think about that, how big our margin for error is.
I’m trying to equate it as if it was a sports analogy. My friends and I play a lot of golf and my friends are looking for these scrambles, right? Like a four-man scramble format that we go out and play against others.
We try to get into a skins game and these charity events, there are ones that have these big cup scrambles. And so for the normal, three and a half-inch, four-inch cup that most golfers are accustomed to, they have like a coffee can size cup, and it’s like an eight-inch golf cup.
So that’s the margin for error that we build into our trades on Equities on Demand. And that makes you a much better putter in golf. We can be a lot better trading results-wise, when it comes to how we’re doing and how our traders are doing in EOD.
Clayton: Yeah. And I love what John just posted. I love this. I want to know who’s got the same mentality within the group. John posted, “Forget spreads. I want the best possible intraday trades today, either bullish or bearish.” How many of you were like, “Oh man, give me the best trade for today right now.” Right? Well, here’s the deal, Chris, can you pull up a Bottom Fishing chart?
Could you pull up WWE [on screen] for me? Cause I wanna know if we show you, John, if this is the kind of trade you’re looking for, then you’re in the right spot. So this is what we call Bottom Fishing. And what we do, just to let you guys know, this is our act for those that are saying, “Man, I just want the best couple trades.” We have up to eight or so [trade opportunities] per day.
Some days, there’s none. There might not be any today. I’ve been flipping through. I think there’ll be a couple of trades. But as of right now, there was a couple that met the requirements about an hour ago that no longer do. But here’s an example of one. So two days ago, over the weekend we posted, “Hey, listen, this trade meets our requirements.”
If we put in, what’s called the Money Flow pattern below our bands. It came through our scan. We’ve created these scanners to make it really easy. It takes the 7,000 stocks down to 30 or 40 stocks. That’s the fundamental scanner, right?
That’s like, okay, it’s met these fundamental and technical requirements. And then we go a little bit deeper and we say, out of those 30, which ones meet what’s called a money flow pattern and prices below the two bands?
“In fact, every single Bottom Fishing trade that we’ve called out has within one week paid huge dividends to students that were in [those trades].”
Most of the time they pay out within the same day, but every single one of them have paid big dividends within one week of us calling them out.
That’s the way that we look to find the best trades, guys. And we do it every single day. And as Gary was mentioning, we send out our Telegram trades every single day at the market close.
Sometimes it’s a little bit later, but [they’re sent] before the market opens the next day, you have your one to six, eight stocks that we’re looking to buy. And I would say, probably seven to eight times out of 10, those stocks have aggressive runs the next day, Chris.
Pulver: Yup. And that’s what we’re looking at right here [on screen]. So we’re issuing the trade here. We’re looking for our rules. We have all the details on that. We do it every single day. We review active Bottom Fishing every single day. And this trade right here, just on the conservative side, Tyson, this trade right there ran right up to our target. We’re talking about, the dollar amount is irrelevant, so we had a close at $53.85.
We had our target rally up here towards $55.10. I’ll just do the math here. And what did I say this low was? $53 85. Yep. So It may not seem like a lot, but that’s a 2.3% gain in one day.
Clayton: That’s not only in one day, but that’s in an hour and a half, guys. You’re done [with the trade]. Now imagine this, the market opens up at 9:30 a.m. You took this trade and you made your money, now go live your life.
Pulver: Yep. And so, what’s interesting, Tyson. Did you see me flash up NCTY? Why do you see me flash this one up here? Take a look at this. So somebody is asking, “How long do we hold it?”
Look, we got a trade right here — NCTY, trade one. I actually added to it down here [on screen] on this gap, lower and I held on to it right there. So I did make some money on this trade. Look at where this came back within one, two, three, four days — within four extra days. And again, I’m not saying that I’m impatient because I held on to the trade for one, two, three, four days.
But another four days, essentially like Tyson said, between one to two weeks and this trade would have paid a lot more than what I closed it out for. I ended up closing for like $20. This was about $250 of profit on one position.
Clayton: I just went through these before we started our session. Every single one we called out, Chris, if you had held it the same day, most of them pay on the same day. But if you held it within the same day or within probably about five days at max, you made money in every single one of them, which is really amazing to be honest with you. It’s absolutely amazing.
But that’s not the only thing we’re doing [in Equities on Demand]. We’re also doing the other things with the power plays and earnings plays and stuff like that.