Tom & Dylan are back to decipher what is going on in the market in this segment of Truth or Skepticism! They discuss what Tom is doing now that volatility is heightened, and also talk about the DOL’s proposed changes to IRA accounts. Check out this sneak peek, and be sure to watch the entire segment below!

MARKET CONTRACTION & VOL SKEW

Is this level of volatility predictive of some future event?
— Dylan Ratigan

Tom explains how he likes to trade short, so this increase in volatility has been great for the option premium he sells. The market perception still indicates risk to the downside, and that is evident in the volatility skew. For that reason, his deltas are still short. This is the kind of market that two sided traders love! 

You have reasonable expectation now that something’s going to happen every day with this increase in volatility.
— Tom Sosnoff

MEDIA REACTION TO MARKET ACTIVITY

Barron’s — they say it comes down to stock picking — What do you think?
— Dylan Ratigan

Tom explains that the media has got it all wrong. Nobody cares about stocks anymore - it’s all about the bigger markets with the heightened volatility in this current market. He pays attention to smaller stocks when general market volatility is low, because opportunities are scarce. Earnings plays and various other events that spike implied volatility in those stocks are what captures his attention.

Liquidity rules and when you get high implied volatility with the indexes, there’s no reason to pay attention to individual stocks.
— Tom Sosnoff

BUY LOW, SELL HIGH?

When you have no context, what and when do you buy?
— Dylan Ratigan

Dylan & Tom talk about the notion of buying stocks low when the market dips. Tom argues that nobody can define “low”. He believes being smarter about entry, and trading small, is paramount to picking the low. Instead of dumping his expected allocation at once, he breaks them up into tranches and goes from there. For example, if his expected trade size is 5% of his portfolio, he explains that he may have 5 tranches of 1% each to strategically enter and not get too large too fast.

The lower your % allocation is, the greater the number of negative consecutive occurrences you can withstand.
— Tom Sosnoff

WHAT’S TOM TRADING?

Tom finishes the segment by explaining his current portfolio. He is long virtually every currency & commodity, and long a few individual underlyings, but his overall market delta is still short.