Face Plant Thursday – Facebook Drops 20% and Takes the Nasdaq With It

Wheeee, this is fun! 

We made a very quick $2,000 on our Live Trading Webinar idea to short the Nasdaq (/NQ) into the close as Facebook (FB) dropped 20% on earnings disappointment.  Poor Mark Zuckerberg lost $17Bn yesterday but at least we got our $2,000, right?  If only he would have listend to us and hedged his Billions into the earnings report, he could have protected his gains, right? 

That's what hedging is all about – it protects your assets from future uncertainty and that's why we prefer to have short-term short positions in the Futures – our portfolios are already filled with long-term longs – we don't need more of those!  BALANCE is the key to successful trading and this morning /NQ is down to 7,400 (where it can be played bullishly for the bounce) and that's another $1,200 per /NQ short.  We still have our /YM shorts and the Dow is still up around 25,450 and /YM pays $5 per point so even 1/2 of the Nasdaq's 1.75% pullback would be a 200-point drop, good for $1,000 per contract. 

Remember, I can only tell you what is likely to happen and how to profit from it – that is the extent of my powers….

Speaking of profits, in Tuesday's Morning Report we discussed using SQQQ as a hedge, picking up more Jan $10 calls at $2.50 and those should be about $3 this morning for a quick 20% gain against the Nasdaq's 1.7% loss so that's very good leverage on that hedge, giving you 12:1 protection on the way down but, of course, we're more worried about a major 10-20% correction in the Nasdaq than we are in a little dip like this.  I also said:

Oops, now there are rumors that China may be adding stimulus to their economy so no shorting yet – we'll have to wait and see how high we pop but hopefully 7,475 and certainly 7,500 will be a great shorting line on /NQ.

So all we did during yesterday's Live Trading Webinar was follow-through on our plan to short the Nasdaq around 7,500 from Tuesday Morning's Report, where we analyzed the top Nasdaq components and
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