Postcards: Learning How to Lose...

Whether you're a trader or an investor... you need to think about the exit before you hit the Buy button. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: Learning How to Lose...]( Whether you're a trader or an investor... you need to think about the exit before you hit the Buy button. [Garrett {NAME}]( May 22   [READ IN APP](   Market Update: Buying conditions in the housing market continue to erode. Today, home sales took a hit despite a recent uptick in inventory. This chart tells you everything you need to know about the state of affairs. Consumer surveys show buying conditions hit their worst level since the early 1980s… But it won’t improve until inflation is finally drowned in a bathtub. We should have gone to 6%, and we should not have printed so much money. When rates go down… it could worsen… as many people try to sell and upgrade simultaneously. Just FYI, markets are overbought on the S&P 500… and that’s usually a recipe for profit-taking across the board… especially after the Fed minutes showed more concerns about inflation. --------------------------------------------------------------- Dear Fellow Expat: I was going to take the day off from Postcards for the first non-Saturday in some time. The reason: Tomorrow’s a big deal in my house - and I needed to spend more time than usual word-smithing tomorrow’s piece. But something happened today that is a bit unusual for us. We lost on a recent trade at Republic Insider. It was our first loss in months - and it required swallowing hard and biting the bullet. We focus on specific trades that target a 20% gain, an 80% probability of profit, and a 100% annualized return. The company we selected had sizable insider buying at the CFO and Director levels, all at prices much higher than today’s $16.50. And last week, the trade looked like it would provide that return… After all, news broke that Walgreens was exploring a deal to sell its British “Boots” business. And then… well, the bottom fell out of the stock. Learning How to Lose Whether you’re an investor or a trader, it’s essential to think about one thing before you hit the Buy button. That’s your exit. If you’re buying a stock… it’s essential to consider the various trading tools you can use to protect your principal. [I’ve long enjoyed using TradeStops as a mechanism]( to identify a smart exit if the investment doesn’t go my way. With credit spreads or options, prayer is not a reliable strategy. Holding the position and hoping that the stock will suddenly surge… it’s how you turn a manageable loss into a flat-out massacre. With credit spreads (when I sell them), I prefer to make the acceptable loss equal to the potential gain. So, if I sell a $2.00 credit spread, and I recently got a credit of $35 on $165 in margin, the most I’m willing to lose is repurchasing it for $70. That would be a 21% loss based on the margin. But if I don’t pay attention… and we let it go… that could quickly turn into a $100… even $165 loss on all credit spreads. So… with Walgreens, we lost 15% on this trade. But we’ve had more than two dozen wins and only four losses, so we’re winning more than we lose… and we lose little. Of course… it’s the losses that always bother me. That won’t ever change. It’s essential to know your risk tolerance and your trading style. My idea of risk is a bit more conservative given that our readers span from all walks of life and experience. Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()