Market Movements

^{*Weekly Return is calculated as market open of the previous Wednesday, to market close this Tuesday (yesterday); Current Level is Tuesday’s (yesterday’s) close.}

Weekly Rollout

• The market continues to start 2026 off strong

• Venezuela’s stock market is up 67% since the Maduro incident

• $400K profit on a Maduro bet sparks insider talk

• What are the three goals that this editor has for their portfolio in 2026?

• Just 21 days out, and there is slightly less than a 20% chance of a rate cut

• Could Nvidia hit $6 Trillion? Wall street is divided

• Single-stock IV spikes hint at upcoming catalysts

“Good-To-Know’s”

In trading and investing, this shows up when new information goes against a trade, but we keep the position open anyway. Instead of re-evaluating the risk, we adjust the story, downplay the warning signs, or finding new reasons to stay in.

This tension is usually eased mistakenly with explanations, not action.

Over time, that leads to the defense of positions because we want them to be right, not because they are. The story is more important than the facts.

We stray from the truth when this happens.

Strong strategies require flexibility to be wrong and adjust quickly.

Quote(s) I Like

Thought Throttle

Happy New Year, and welcome to 2026.

There’s no better time to think about improvements we can make—both personally and in our options journey.

Here’s one potential “resolution” — stop getting boned by ridiculous bid-ask spreads.

What is a bid-ask spread, you ask?

It is simply the width between the bid and the ask price of an option. In practice, it functions as an unseen ‘fee’ charged by the market maker for enabling the trade.

Let’s Look at an Illustration:

Assume two companies, Company A and Company B (super creative), both trade at $100 per share, and we’re looking at the 45-DTE at-the-money call option on each.

Company A is highly liquid. It has a large market cap, heavy volume, and deep open interest.

• Bid: $1.95

• Ask: $2.05

If you were to buy and immediately sell this option, you would buy at $2.05 ($205), and sell at $1.95 ($195).

That’s a $10 spread, which is roughly 4.9% [(2.05-1.95)/2.05].

Now compare that to Company B, a less liquid name.

• Bid: $1.80

• Ask: $2.20

The midpoint is still $2.00, but the spread is now $0.40, or 18.2% [(2.20-1.80)/2.20].

Same stock price, same midpoint. Very different cost to trade.

And this downside of illiquid tickers only gets amplified when you consider that you have to get out of the trade. It’s another transaction that eats away profits.

Be mindful of liquidity. It’ll make or break ya.

If You’re Still Considering Trading Options on Less Liquid Names…

1. Favor monthlies over weeklies — Weeklies amplify spread pain. Monthlies usually have better liquidity.

2. Potentially, go farther out in maturity — Longer-dated options often have larger absolute spreads, but lower percentage spreads, which could be beneficial. This is setup dependent and may not always be better.

3. Use limit orders at or near the midpoint — If the trade requires crossing the spread to work, it isn’t priced well enough.

4. Refuse unacceptable spreads upfront — The abstinence answer; Just don’t do it. The market is full of opportunities for those who are patient.

Trade Mechanics

Let’s look at a real-world example of how bid-ask spreads affect otherwise similar option trades.

We’ll compare Nvidia (NVDA) and Ross Stores (ROST) using options with similar time (45 DTE) and delta (30 delta). NVDA is currently trading at $187.24, while ROST is trading at $187.53.

Nearly identical stock prices.

Compare:

For NVDA, the option under consideration is the 20 Feb ‘26 $175 put (~27 delta). This option has a bid of $4.75 and an ask of $4.80, resulting in a bid-ask spread of $0.05.

While it’s possible to get filled near the midpoint, it’s best not to count on it. Using a more conservative assumption—about 15% above the bid—the expected fill is around $4.76, or $476 per contract. With a spread this tight, the gap between quoted and actual premium is small.

For ROST, the comparable option is the 20 Feb ‘26 $180 put (~26 delta). This option has a bid of $1.95 and an ask of $2.35, creating a bid-ask spread of $0.40.

Using the same execution assumption—about 15% above the bid—the expected fill is roughly $2.01, or $201 per contract, instead of the $2.15 midpoint. In this case, about 6–7% of the quoted premium is lost right away to execution before time decay even begins, not to mention the extra time spent waiting on fulfilment.

From a return-on-collateral perspective, NVDA, would collect about $476 in premium against collateral of $17,024 ($175 strike - $4.76 premium). This produces a return of roughly 2.8% if the contract is not assigned, which is about 25.1% when annualized.

For ROST, we would collect about $201 in premium against collateral of $17,799 ($180 strike - $2.01 premium). This leads to a return of about 1.1% if unassigned, annualizing to about 9.5%.

Same delta, similar duration. But a materially different efficiency once liquidity is accounted for.

Keep in mind:

• Midpoint fills are never guaranteed, especially in less liquid names

• Wider spreads mean more of the premium is spoken for before the trade even starts

• Illiquid options often look attractive but pay you less in practice

• Theta has to overcome spread drag before it can work in your favor

• You do not consider liquidity at your own risk

This is for educational purposes only—not a trade recommendation. Remember to always do your own due diligence and consult a financial advisor before making investment decisions.

Throttle Q&A

First Five Days Indicator: What Is It and Where Do We Stand?

The First Five Days Indicator—from the Stock Traders Almanac—looks at how the major indexes perform during the first five trading days of the year. The proven idea is that early January performance often gives a rough sense of the market’s tone for the year ahead.

Through three of the first five days (1/2, 1/5, and 1/6), the market has started the year modestly higher across major benchmarks. As of January 6, the S&P 500 is up ~1.5%, the Dow Jones Industrial Average ~2.9%, the NASDAQ ~1.3%, and the Russell 2000 ~3.3% year to date.

With two sessions left, the signal looks cautiously positive, not conclusive. And since this indicator has historically been weakest in midterm election years, it’s best used as context, not a strong signal.

If Wide Bid-Ask Spreads Are So Costly, Why Do Some of These Trades Still “Work”?

Because a few anecdotal outcomes are a poor judge of structure. A trade working doesn’t always mean it was a good trade to begin with.

Wide-spread trades can still succeed if the stock moves quickly in your favor or if time decay hides the execution costs. But those wins depend heavily on timing and aren’t easy to repeat.

When the market turns, the lack of liquidity shows up fast. Exiting becomes expensive.

Consistent option selling isn’t only about avoiding losses, but avoiding trade structures that fall apart when timing stops going your way.

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Disclaimer

The information provided in this newsletter is sourced from reliable channels; however, we cannot guarantee its accuracy. The opinions expressed in this newsletter are solely those of the editorial team, contributors, or third-party sources and may change without prior notice. These views do not necessarily reflect those of the firm as a whole. The content may become outdated, and there is no obligation to update it.

This newsletter is for informational purposes only and does not constitute personal investment advice. It is not intended to address your specific financial situation and should not be construed as legal, financial, tax, or accounting advice, or as a recommendation to buy, sell, or hold any securities. No recommendation is made regarding the suitability of any investment for a particular individual or group. Past performance is not indicative of future results.

Options come with inherent risks. We strongly advise you to consult with a financial advisor before making any investment decisions, including determining whether any proposed investment aligns with your personal financial needs.