Daily Market Newsletter

I have the following position:

• SPX 24SEP 2850/2855*2925/2930 Short Iron Condor (9/4) was entered for a $2.50 credit. I have placed a $1.80 debit limit order GTC to secure a 25% reward-to-risk exit. We want to see the price decline in the short-term; this will make it easier for us to secure a target profit on the position.

I am currently seeing a $2.05 debit to buy back the position and the price is doing exactly what we expected…and what we want to see from this position. It can even pull back a little bit lower without causing any harm to the profitability. Any release higher in the price will bring about a vol crush which will help the position. As long as we don’t see a one-day 35 point rally, I would expect the limit order to fire in the next couple of days.

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 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:

• VXX Stock – I own 12 shares of this stock and will hold until Armageddon occurs.
• SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level. I will look for the next bounce to sell calls into.

No entries at this time; I’d like to see a decent pullback before we go shopping again for new stock candidates.

The crypto market got absolutely hammered last week and we’re watching to see if the price breaks into lower-lows across the board. This gets us one step closer to the final capitulation required to end this bear.

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 287.60, there is a +/-4.153 EM into this coming Friday.  This is somewhat larger than last week’s 3.331 EM, and the EMs have continued to rise over the last 3 weeks.

The EM targets for this Friday’s close is 291.75 to the upside, and 283.45 to the downside.

I took the test of the lower SPY EM on Thursday as an entry on SPY 7SEP 287 calls for $1.27 debit. I sold out of those calls on Friday morning for a $1.51 credit; this gave me a net profit of $22/contract after commissions, or a 17% return on capital.

This week I would once again be enthusiastic about fading the lower EM marker, and we are going to look for a SPY long within the Swing Trade area.

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.

Right now there are no results on this scan as we’re seeing a slight correction across the board. 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 continues to drop I will sell short-term puts against it (on paper).

I’d like to see if we can secure a deeper run before selling premium, or just close the position out for a profit with the long option alone.

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 no current positions at this time.

I have no plans to enter longs this week, as most markets that we follow are recovering from exhaustion. I’m going to give them one more week of consolidation and then look for longs again shortly.

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 the following position:

• SPY 16NOV 257 Puts (8/23) entered for $1.50 debit. I would close these on a test of the 200 day moving average..