You Got To Know When To Hold 'Em And When To Fold 'Em

A successful trader knows how to manage risk more than anything else.

It's imperative to consider your risk before pulling the trigger on a trade. I've spent a great deal of time studying the history of the market and one thing I know, without a doubt, is that buying just before the 19th of a calendar month adds risk. The 19th to the 25th of ALL calendar months produce an annualized return of roughly -8% on the S&P 500. Generally speaking, it's much better to buy on the 25th or 26th, simply based on history. The reason for this is monthly OPTIONS that expire. An example this month is NVIDIA Corp (NVDA). First, check out the NVDA chart and Tuesday's failed breakout attempt:

Enter NVIDIA Corp (NVDA):

Next, realize that there is currently $730 million of net in-the-money call premium on NVDA stock right now. In other words, it is in the market makers' best interest to sell NVDA stock in their own accounts to drive NVDA's stock price lower. I don't know if it'll happen, but the options-related RISK of NVDA is to the downside - and in a potentially big way. Today's false breakout at overhead price resistance and negative divergence simply add to the risk. Again, none of this guarantees a lower price for NVDA this week, but I certainly wouldn't look at all the obstacles and buy the stock right now.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.