After a rough week of trading — like the one I’ve just had — it’s important to look in the mirror and think about how you can improve. 

And I often learn from YOU — my students — just as much as you (hopefully) learn from me. 

I remember my mentor Tim Sykes saying something like this to me over a decade ago when I first joined his Trading Challenge. 

But at the time, I was an inexperienced newbie … I couldn’t believe I would ever be able to teach Sykes as much as he taught me.

Now that I’m a teacher myself, I see what Sykes was getting at…

During my webinar today, Evolvers had some excellent questions relating to some of the aspects of my trading I’m actively working toward improving. 

So I thought it would be a good time to go into further detail on some of these burning questions. 

After all, if my students are asking me a question repeatedly, it must be something worth addressing…

“Why do you keep trying to short TSLA?”

I’m not surprised that Evolvers are asking this. I’ve made several attempts at Tesla Inc. (NASDAQ: TSLA) short setups — with little to no success.

But regardless of my trading history with this stock, I can’t ignore the technical indicators I see in the chart. 

Let’s do a quick rundown of the bearish signals I’m noticing on TSLA:

• It’s struggling to crack strong resistance at $1,100
• It can’t seem to stay above the $1,000 mark for very long…
• It’s been green eight days in a row before today…
• The daily trading volume finally started to decline on Thursday, signaling that TSLA’s bullish momentum could be losing steam…

I never let past failures keep me from trading a setup that checks all my boxes.

I don’t care that I’ve failed at shorting TSLA before. I’m stubborn and determined. And I like this setup.

That said, I don’t recommend that Evolvers follow me into a big TSLA short. This is an extremely delicate play that requires the utmost experience and discipline.

“Considering the current market conditions, why don’t you buy more calls?”

I get this question every time the market starts ripping, so allow me to address it…

There’s an old saying that says, “Stocks take the stairs up and the elevator down.” 

I primarily trade puts because I want to catch that elevator down. You can generally make more money in a single day on the downside than you can over entire weeks on the upside.

Look at the chart for any high-flying momentum stock and this will become painfully obvious. 

These charts always look the same — a long, slow staircase of green days — followed by a demoralizing elevator down on the first red day. 

As an options trader, catching that massive single-day move down is one of the most advantageous plays you can search for.

But that doesn’t mean it’s easy to nail the timing. Perfecting put trades is a nuanced art that you’ve gotta practice over and over.

I recommend focusing on three steps in particular when approaching a short setup:

• Target tops on overextended stocks
• Wait for a clear rejection at a key price level
• Be ready to strike on the first red day

And when it comes to bullish market conditions, don’t let them fool you… 

An inexperienced trader may think a ‘bear market rally’ (like the one we’re currently in) is a good time to buy calls — but I strongly disagree.

Contrarily, I’m looking at this rally as an opportunity to buy cheaper puts at higher prices. And I suggest Evolvers do the same.

“What do you think about GME and AMC as potential puts plays?”

I like the prospect of shorting these meme stocks — but I don’t think it’s time to pull the trigger … yet.

GME and AMC will be high on my watchlist next week. But I certainly wouldn’t be buying puts today…

I’m hoping they each have one or two more massive green days. I wanna see an obvious blow-off top before I consider buying puts. 

REMEMBER: The higher meme stocks squeeze, the further they can drop on the way down.

The moves we’ve seen in GME and AMC this week have been pretty incredible. I’m intrigued, to say the least.

But we’ve gotta be patient with shorting meme stocks here — wait for the perfect entry to present itself. 

If you’re buying puts on meme stocks, and you don’t time it perfectly — it’s easy to get your face ripped off. Trade carefully.

Final Thoughts

Thanks for the insightful questions, Evolvers! If you’ve got a question for me, don’t be shy — I LOVE hearing from my students.

I hope I’ve helped answer some things you may have been unclear about. But you should never stop learning as a trader.

Keep asking. I’ll keep answering. And we can all keep evolving.