Daily Market Newsletter

I have the following positions:

• SPX 24AUG 2775/2780*2855/2860 Iron Condor (7/30) was entered for a $2.50 credit. I will look for a 25% return on risk from this position.

Friday’s price action pulled the price back into the LP Condor range, but the rising IV depressed the T+0 line. This overall trade is showing about a break-even level, and the gamma will rise in the next two weeks and make management of this position very “whippy.” If a pullback allows us to secure a 15-20% return on this trade then I’ll remove the position immediately. This would correspond to at least a $2.10 or lower debit exit.

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 currently have 17AUG $16.50 SLV calls (6/8) for $24 credit. .

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

The crypto market is continuing to get hammered the last few days and many bear flags have been broken; even BTC is disappointing. This is GOOD because we’re one step closer to the final capitulation. The bear market and strong weekly downtrends look to be having their effect.

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 283.16, there is a +/-4.179 EM into this coming Friday.  This is significantly larger than last week’s 2.867 EM, which shows the impact of recent global risk events hitting the tape.

The EM targets for this Friday’s close is 287.34 to the upside, and 278.98 to the downside.

With a lot of short-term energy available on the daily chart, this does not present a good “fade” entry for the EM. I do have a long condor in play for the RUT which is what I’m playing for the “expansion” move forecasted.

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 I’m seeing MRK, PFE, and LLY show up on this scan; not yet ready for entry though.

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.

I have the following positions:

• XLB 10AUG 58.5/60.5 call vertical (7/11) entered for $.91 debit. Per yesterday’s advisory I closed this trade (8/7) for a $1.24 credit. This gave me a net return on this trade of $29 profit/contract or a 31.8% return on capital.
• XRT 17AUG 49/51 call vertical (7/17) entered for $1.02 debit. I closed this trade down (8/8) for $1.41 credit; this gave us a net profit of $35/contract, or a 34.3% return on capital.
• XLF 7SEP 28/29 call vertical (8/6) entered for $.46 debit; I will look for a 50% return from this trade.

This might be a risky time to be long any assets, with price jammed up against the all-time highs on the NQ and SPX and RUT.

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.

If the price continues grinding higher, I will add the next series of long puts after August expiration.