The Market Is Driving Too Fast Right Now

Friday afternoon, I strapped into a Porsche and took it out on a racetrack just outside Atlanta.

Angela surprised me with the experience for our anniversary… She knows me well!

The car was fast. Faster than anything I have any business driving on a public road.

And here’s what struck me after a few laps with my driving coach…

I was driving aggressively. Pushing the car hard into the turns, getting on the throttle early, chasing every bit of speed I could find.

But I never once felt out of control.

Because everything around me was built for that speed.

A closed track. A controlled environment. A professional instructor in the seat next to me, talking me through every corner. Run-off room on the outside of the turns in case I push a little too far.

I could drive fast precisely BECAUSE the risk was managed.

That is exactly how I’m thinking about this market right now.

The market is driving fast, too

Take a look at this:

Investors have been pouring money into leveraged ETFs at a staggering pace.

These are funds engineered to move two or three times as fast as the market itself.

Total assets in these turbo-charged funds are up by more than 65% in a matter of months. As of the second quarter, we’re talking about nearly $189 billion parked in them.

And it is not just leveraged ETFs.

Margin debt (the money investors borrow to buy stocks) just hit a record $1.4 trillion. That is up 54% from a year ago.

Both of these numbers tell the same story.

Investors, the professionals, and the everyday crowd alike are taking on more and more risk to chase this market higher.

Trends Can Continue For a Very Long Time

Let me be clear here… I am NOT telling you the market is about to fall apart.

In fact, history tells us these periods can run longer than anyone expects. Bubbles have a funny habit of expanding rapidly right before they pop.

The trend is higher. And a rising trend is a place to make money, especially in the AI and technology names leading this charge.

I have no interest in stepping off the track while the car is still running fast.

But I also refuse to drive without a seat belt.

So here are the three things I’m focused on right now.

I’d encourage you to think about each one in your own portfolio.

1. Diversify your strategies, not just your stocks

Most investors think diversification means owning different stocks. That’s only half the picture.

Real diversification means owning different STRATEGIES.

Some of your positions should be built to make money if the market falls.

That way, when aggressive tech stocks eventually pull back (and at some point they will), you have something in your portfolio that actually profits from the move.

Right now I’m running bullish trades AND bearish trades side by side.

On purpose.

2. Stay nimble

Our job as traders is to keep our eyes open.

We watch what is happening right now. And we stay alert to what could change. When the picture shifts, we want to be able to move quickly.

This is one of the reasons I love using options.

A well-structured option position lets me adjust my exposure fast, without needing to unwind a giant pile of stock.

3. Set up asymmetric trades

This is my favorite part.

I like to structure trades where my risk is clearly defined, and my potential reward is far larger than what I can lose.

Think about what that gives you.

If I know the most I can lose on a trade is a set amount, but that same trade could pay me three or four times that number, I can keep playing the trend higher with confidence.

I’m still in the game. I’m still chasing gains.

But I always know exactly what is at stake.

That is how you drive fast without smashing the car into a wall.