Daily Market Newsletter

I had the following results for the 18APR 2019 Options Cycle:

High Probability Neutral Trades

• No HP Short Iron Condors this period.
• SPY 27MAR 271/272*287/288 Long Iron Condor entered for combined $.34 net debit was a loser on both sides for a net $190 loss with commissions on five contracts. 
• SPY 08APR 287.5 Long Straddle entered for $2.38 debit and closed for $1.22 credit for a net $120 loss after commissions. 
• SPY 12APR Long Straddle entered $4.68 debit and closed for $5.25, creating a $53 profit/contract or an 11.3% return on capital.
• SPY 15 APR Long Straddle entered $1.90 debit and closed for $2.21 credit. This gave me a $27/contract profit or a 14.2% return on capital.

Low Probability Iron Condors

• SPX 18APR 2725/2730*2860/2865 Iron Condor entered for $2.60 credit. I closed the call spreads for a $4.95 debit giving me a net $241 loss after commissions.  

Time Spreads

• SPY 29MAR/26APR 282 Put Calendar Spread filled for $1.69 debit and closed for a $1.90 credit. This gave us a $17/contract profit or a 10% return on capital for the trade. 

Cash-Secured Puts/Covered Calls

• SLV 18APR $15.5 calls sold for a $.17 credit were left to expire, creating a net $160 profit on a ten contract position after commissions.
• EBAY 26APR $34 puts sold for $.73 credit and closed for $.10 debit. On a ten contract position this created a net profit of $610. 

“Whale” Trades

• CSCO 26APR 52/53 Debit Call Spread entered for $.50 debit and sold for a $.74 credit. That gave me a $20/contract profit after commissions, or a 40% return on capital. This earned a $100 profit on five contracts. 
• UPS 29MAR 112/113 Debit Call Spread entered for $.50 debit and closed for a $.10 credit. This netted a $220 loss on five contracts after commissions.
• SBUX 29MAR 71/72 Debit Call Spread entered for $.50 debit and closed for a $.74 credit which gave us a $20/contract profit after commissions, or a 40% return on capital. For a five contract position, this gave us a $100 profit.
• PYPL 26APR 101/102 Debit Call Spread entered for $.50 debit and closed for a $.60 credit, giving me a $6/contract profit after commissions, or a 12% return on capital. For a five contract position this gave us a net $30 profit after commissions.

Swing Trades

• SPY 17APR 282/283 debit put spread for $.42 debit expired for a net $44 loss. 

Hindenburg Positions

No trades this period.

SPY EM Fade/Target

No trades this period.

Lessons Learned from this cycle:

A positive month but another mediocre performance as a really odd mixture of price action and underwhelming moves converged to make few strategies work well. Let’s net it out:.

What I think we did right this cycle: We did a few things right this cycle, because a lot of folks got killed on the rebound.

• I stayed away from HP Iron Condors! Those would have killed us. The one short condor that I did try was limited in size and risk. . 

What I think we screwed up in this cycle:

• I’m not sure that it’s fair to say that I “screwed up” because the signals were there; when I get double-exhaustion signals on the Weekly and Daily charts, I would have no excuse NOT to place some form of neutral income trade like a LP Condor. They just did not work this cycle as the market collectively thumbed its nose at the technicals and continued to accumulate.
• But on the flip side, the long setups didn’t exactly leap off the charts. The few that we did take, which were extremely strong charts, barely made their targets and perhaps my only mistake here was short-shifting them by taking less than original profit targets. We’ve had several trades lately leap out of the gate early only to fade afterwards so capturing profits was paramount for me. 
• The Long Condor *almost* got to profit targets on both sides and ultimately lost everything. I could have taken partial profits on the downside on the trade and doubled profits on the upside by at least getting something for the call spreads. Instead, doing nothing yielded….nothing.

What we have to do going forward: This market is all about MOMENTUM and nothing else. Find the issues that are leading markets and keep it simple. 

I have the following positions in play:

• SPX 10MAY 2860/2865*2950/2955 Iron Condor (4/15) entered for $2.50 credit. My goal is to secure a 25% return on risk. As long as the price continues to coil in this area underneath the all-time highs, I think that the odds are very good for a target profit return. If we see the weekly energy returning faster than expected, I might reduce my target profit before this this busts a move again. 

No additional trades at this time.

I have no current positions:

Calendar spreads are good for markets in quiet/trending character. If the market reverts back to quiet/trending, then I’ll look to continue this method. 

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 have the following positions in play:

• SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level.  I need to sell the next series of calls and I might have to go all the way out to the JUL monthly series if we don’t see a quick pop in price soon. 
• PFE 17MAY $39 puts (3/18) sold for $.39 credit. It would be a good idea to clear this one prior to 4/30 earnings, but the recent crash in XLV has made this impossible and I will have to hold onto this one through earnings this week. 

No additional trades at this time. We need to be patient to wait on the next pullback. We are “green light” again because the death cross has cleared on most of the indices that we track. 

Crypto has had relative strength over the last few weeks and no one believes this rally. The Bear appears to be over and I’m looking for one last shake-out to signal this.  

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.”

From Thursday’s close at SPY 290.02, there is a +/-3.268 EM into this coming Friday; this is about normal based on recent weeks. The EM targets for this Friday’s close are 293.29 to the upside, and 286.75 to the downside. 

A test of the lower EM should be a signal to fade that test to the upside. Upside EM fades might continue to be difficult or be blown through as long as the market is in accumulation mode.

I will start playing directional bear spreads once we see upside exhaustion on more than one timeframe. 

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 in play at this time:

• TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit. We will look for a 50% return on this trade. Earnings have already passed for TGT.

Several candidates look really good but we are too close to earnings to take them.

We are also keeping an eye on the Momentum stocks in this section. 

No other entries at this point. 

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. 

I have no positions at this time. I cleared out the most recent set of puts on the drop to the 200ma back in October. I will “reload” again soon, if/when the weekly chart goes into upside exhaustion. The three-month puts are coming down in price closer to what I’d prefer to pay. (3 months out/90% of current value)