Buy WCG Wellpoint, gold nears $700

Trade

Buy/write on WCG, Wellpoint Healthplans on earnings news
Buy the stock, sell the June 45 calls

Meanwhile gold pushes near $700. I am amazed at the strength. This is a once in a twenty-year kind of run. I am sorry that I only made very modest profits from it. However, my secure thought is that Warren Buffett did not fare much better on his silver. There is always going to be another chance, however, this powerful kind of move is rare. With MarketVane sentiment so one-sided, it is very rare that the vast majority are right.

Again, calling "top" or shorting this kind of momentum is one of the most dangerous games a trader can play. Legendary trader Paul Tudor Jones made his name by selling short at the top or buying at or near the bottom in many markets. He is one of the few that can do it profitably. Many other traders are wrapped up in ego and being right than making a profit and limiting losses. Jones also says that he often is wrong six or seven times before actually calling the turn successfully. He uses tight stops to limit losses and gets out when the market proves him wrong.

I believe that every successful trader must find a way to manage the risk, or their number will come up and they will no longer be trading. Diversifying, hedging, limiting losses are some of the techniques that I use. Others manage their risk in different ways. There are a lot of ways to do it, and there is no one-size fits all way.