The Qs Don’t Own A Single Bank

SPY and the Nasdaq 100 ETF (QQQ) or Qs as I like to call them…sometimes give me opposite reads.

Bullish over here, bearish over there, both at once, and I traded them both. Everybody assumes that can't happen.

You get a call setup in SPY, so obviously you've got the same thing in the Qs, because they move together, right?

Sometimes the direction's different.

The Qs don't own a single bank.

Not one. The Nasdaq-100 throws financials out by rule, which means JPMorgan, Bank of America and Wells Fargo are all sitting outside the fund.

SPY carries about 14% financials.

So on a morning when the banks are ripping and tech is taking a nap, SPY has an engine running that the Qs simply don't have. Those two charts are not going to tell you the same story, and there's nothing mysterious about why.

It goes the other way too. The Qs run about 55% technology against 35% in SPY, and the top ten names are roughly 46% of the whole fund compared to 37% for SPY.

So when the market gets excited about tech, and it has been for years now, that excitement lands on a much smaller pile of names.

The Qs carry a beta around 1.2 against SPY at 1.0, and in plain English that means an identical market move comes out roughly 20% bigger over there.

Usually the indices all kind of trade on the same wavelength, but the QQQ is more amplified and you'll get a bigger move than SPY or the Dow or the Russell. I've watched the velocity on this thing and when it takes off, it is no joke.

Which cuts both ways, and 2022 is your reminder. SPY was down 18% that year. The Qs were down 32%.

Now some of you are already going, see, that's exactly why I don't touch them, they're volatile, they're unpredictable.

Volatility is fine. We will mitigate volatility, that's not an issue, and I've been doing this a long time.

The one thing nobody mitigates is a surprise news thing once in a blue moon, and that's the only thing that knocks price around in my opinion. Other than that, it's go time.

None of it needs to get complicated either.

I don't mess with straddles or spreads or any of that. Straight calls and straight puts, and it’s all defined risk, meaning I know exactly how much I’m going to lose before the trade gets fired.

You don’t have to pick one, you can trade both of them, and I’ll share more insight on how I specifically do that in the coming days.

Rock On,

Voz

P.S. And if you want to trade with me over the next 30 days I’ve made it super simple. Click or tap on this link, and I’ll gave you access to my live room…no strings attached.