Daily Market Newsletter

I had the following results for the 15JUN 2018 Options Cycle:

High Probability Iron Condors

No trades this cycle.

Low Probability Iron Condors

No trades this cycle

Time Spreads

No trades this period.

Cash-Secured Puts/Covered Calls

• NUGT 22JUN $31 short calls were closed for a $120 profit on five contracts after commissions.
• SLV 15JUN $17.5 short calls were closed for a net $140 profit on ten contracts after commissions.
• SSO 15JUN $70 short puts expired for a full profit of $345 on five contracts.

“Whale” Trades

No trades this period

Swing Trades

• IWM 15JUN 160/162 debit put spread expired for a loss of $168 on two contracts.
• XLE 8JUN 74/75 debit call spread RSI(2) was closed for $80 profit after commissions on five contracts.
• HAL 48.5/49.5 debit call spread (RSI(2) expired for a $260 loss.
• SPY 8JUN 277/278 debit call spread was closed for $30 profit on five contracts, after commissions.

Hindenburg Positions

No trades this period.

SPY EM Fade/Target

• SPY 15JUN 268.5/269.5 debit put spread expired for a $170 loss after commissions on ten contracts.
• SPY 15JUN 280/281 debit call spread was closed for a $200 profit after commissions on ten contracts.

Lessons Learned from this cycle:

This cycle was all about the transition from sideways/volatile back into quiet/trending, and with that the associated range contraction/range expansion cycles. I’d say that we nailed the forecast of expansion/contraction and the character shift, however we did not exactly nail the execution of those trades for maximum profit.

For instance, we got a great read for the long condor, and it did exactly what we wanted it to do, however we learned a couple of lessons on the trade (below) which cost us some net return. The 8/21 ema swing on the SPY ended up doing precisely what we expected, however it took too long to release and gave us a very small win instead of the home run that it should have. In most cases, playing a little more “duration” would have been useful.

This cycle really marks the return of the Condor for me, after some time. We executed a perfect LP condor at the end of the MAY cycle, and the long condor for this cycle was almost perfect. I needed to do a better job of balancing the net cost on both sides of the long condor; note that the put spreads were 50% more expensive than the call spreads, so the loss of those really dragged down the return. I did not really think about it at the time, but note to self for next entry.

Changes going forward: We will adopt a “quiet and trending” approach going forward until the market says otherwise.

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I have the following position:

• SPX 2745/2750*2810/2815 Iron Condor (6/14) entered for a $2.50 credit. I will place a $1.80 debit limit order GTC to secure a 25% return on risk entry. The max risk on this trade is the position size.

I have no remaining positions. Calendar spreads are good for markets with some volatility but they are long vega so we can’t enter them during IV spikes or periods of elevated volatility. The IV is starting to resolve lower so we might be back in business if the price resolves back into quiet/trending.

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 currently have 17AUG $16.50 SLV calls (6/8) for $24 credit. .
• NUGT stock – I was assigned on NUGT at the $31.5 price level.I currently own the 13JUL $30.5 calls for $.32 on 6/12.
• SSO – I sold the 15JUN $70 puts (4/4) for $.70 credit. These short puts expired on Friday and were never in any danger of assignment.

I am going to sell the 17AUG BAC $27 puts on Monday for at least a 1% return.

The crypto market has come under a lot of pressure lately and I attribute this to the market still being under the influence of a bear. Until a major “higher low” is printed these rallies will persist and be faded. This weekend was “bloody Sunday” as most major markets lost 10% alone….the faster that we sell down, the quicker the bandage gets ripped off.

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 277.13, there is a +/- 3.149 EM into this Friday.  This is smaller than last week’s 3.894  EM, and is likely to do with getting past the recent FOMC release.

The EM targets for this Friday’s close is 280.28 to the upside, and 273.98 to the downside.

The Daily SPX chart is still in exhaustion, therefore I think that any test of an EM level is a good fade entry.

I will fade either side of the EM this week if touched. ATM in/out spreads early in the week, and long options later in the week.

I have no current positions. I will consider setting up another ratio fly as price approaches resistance:

Entry criteria are:

• Using calls
• 17 to 50 calendar days
• center strike .25 to .40 delta
• ratio is 1/3/2 quantity, from the bottom, calls are long/short/long

We will exit the spread at a 60-70% level of credit received. The max risk on the trade is defined on the graph if the price goes much higher. There are no early exits, only exiting the week of expiry to avoid assignment. Also avoid dividend periods. I am currently trialing some trades and will discuss them in the newsletter; after a few cycles, I will start adding these trades to circulation. TOS scan code: http://tos.mx/hvWmMl

I have the following positions:

• INTC 29JUN 55/57 debit call spread (5/29) was entered for a $.97 debit; I will look for a 50% return from this position. I have a $1.50 exit credit set GTC.
• ABT 6JUL 62/64 debit call spread (6/4) was entered for a $.93 debit. I will look for a 50% return from this position.
• XLV 6JUL 84.5/85.5 debit call spread (6/6) was entered for a $.49 debit. I will look for a 50% return from this position

No other trades at this time; there are just a handful of candidates and the only one that I like is DAL on a break above the descending trendline; I’ll discuss that one in today’s video .

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

• I entered the 17AUG SPY 245 puts (5/14) for a $1.41 debit. I will hold these through the next test of the 200 dma.