Daily Market Newsletter

I have no positions at this time.

We’ll park this strategy until the next high-probability condition shows. We’ll want to see daily exhaustion on the SPX or RUT after a strong move, at the very least. This strategy works best with a quiet/trending market, and not with a sideways/volatile one.

I have no remaining positions. Calendar spreads are good for markets in quiet/trending character, so there is a good shot that we can start to play these again.

The calendar spread tracking sheet is available for your download here. Yes, if you follow the math in the sheet, all of the numbers account for commissions in and out of the trade. Please note: If you trade these positions please keep the size small, to the point where you “do not care” about the success or failure of this position.

I am targeting stocks using short puts/covered calls that offer a much lower absolute risk point, where in event of a crash we can almost define our total risk by the price of the underlying. While this is not how I intend to manage risk in these positions, I view this as fundamentally more solid than trying to actively manage risk on assets that are going for $$$hundreds which have also gone parabolic. I have the following positions in play:

• SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level. I sold the 31DEC $15 SLV calls (10/3) for $.16.
• SSO – I sold SSO 16NOV $109 puts (10/8) for $1.20 credit. I’m still fine with this position and will accept assignment should the price drop from these levels. I will consider buying back these positions should the price bounce higher.
• GLW – I sold GLW 21DEC $26 puts (10/22) for $.26 credit.
• CSCO – I sold CSCO 21DEC $40 puts (10/22) for $.40 credit.
• INTC – I sold INTC 21DEC $37 puts (10/22) for $.37 credit.

No other trades at this time. The recent trades were relatively small positions that would create a discount entry should I be assigned.

The crypto market is holding tough while equities get slammed. So far I am not seeing a lot of correlation between these markets.

Investors should currently be looking to find technical entries to warehouse BTC/ETH/LTC assets for eventual trades on Alt-coins. You should also be looking to devices like “trezor” or other cold-storage devices to keep your assets off of the network, or other secure wallet such as Navcoin. Relying on the security of your broker is no longer good enough; no one can log into your ETrade account and “steal” your stock assets, but the whole nature of Cryptocurrencies and their portability means that someone can grab your assets and transfer them elsewhere. I will continue to discuss the tradingview platform in daily videos as I think that it is currently the best way to chart the “big three.”

Viewing the SPY from the Friday closing price at 265.33, there is a +/-9.034 EM into this coming Friday.  This is about 50% larger than last week’s 6.589 EM and reflects the fear/indecision in the markets that is not going away. The EM targets for this Friday’s close are 274.36 to the upside, and 256.3 to the downside. The lower EM for last week did not hold. We will try to scope out a fade of either EM level this week, discussed in Saturday’s video. Per this weekend’s report, I thought that there was a higher probability of seeing the lower EM tested this week, so we set up an OTM butterfly:

• SPY 2NOV 254/256/258 Debit Put Butterfly (10/29) entered for $.06. I will look for the price to come down to the lower EM and close the position at that point. If the price does not drop tomorrow then I will just let this position expire. 

I will not be fading either EM tomorrow as I’ll be traveling. 

This is a new section for this newsletter; I would like to start to carefully build some bearish positions that would be the virtual opposite of a covered call, yet I will use deep ITM long puts as the short stock substitute, and write short covered puts against those long puts.

I would like to add one additional consideration to the criteria, in that I’d like to see the price print a “lower high” first on the daily chart. Otherwise what is “high” can go “higher” as we’ve seen repeatedly over the years.

I will also publish the criteria for managing the short and long positions with this strategy. This is definitely counter-trend for now but might prove to be valuable down the road.

We previously were seeing LOW and UNP show up on this scan, and both would be winners now. . Quite honestly nothing has really faded after showing on this scan.

Previously I was seeing MRK, PFE, and LLY show up on this scan; I added the MRK 16NOV $75 puts for about $7.00/contract as a paper trade. I’ll just track this one on paper for now while we develop management rules. If the price drops I will sell short-term puts against it (on paper). Even these NOV puts are still underwater after recent distribution.

The scan that I discussed in the 8/4/2018 video is available to download for thinkorswim here: http://tos.mx/OvdVnz

I will also be adding a second Larry Connors scan to this section as well; here is the Connors Crash scan: http://tos.mx/BhHuKL

I have the following positions at this time:

• NVDA 02NOV 285/287.5 debit call spread (10/1) entered for $1.22 debit, looking for 50% return on this trade. I missed my opportunity to make a quick 30% and get out.

No other entries at this point. I would prefer to see the market stabilize first before looking long again. We will see big volatility over the next two+ months.

The “Hindenburg Strategy” is meant to capture “value” from successive corrections that lead up to the final “death spiral” with a Bear Market. The basic principle is to buy 3-month out long puts on the SPY, and to finance those puts by the sale of credit spreads. Frankly, selling the “financing” trades has been a huge challenge in this low-vol environment. I will only sell put spreads on decent pullbacks that allow me to secure put spreads 10% OTM. We have no positions at the current time. I have no positions at this time. I cleared out the current puts on the drop to the 200ma. I will “reload” again on the next bounce up; I would like to see the price retrace the 61.8% fib and for the VIX to drop below 20 again. .