Daily Market Newsletter

I have no positions at this time. Not the right type of market for these trades. If/when the price rallies higher to resistance, that might be an excellent time to place a LP Iron Condor. Not there just yet.

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.

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 personally believe that while markets are in “runaway” mode, easy gains may be had however there is always a huge amount of risk to “buying at the top” as we saw at the end of last week. We’ll look to go shopping soon.

To combat this risk, 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 sold FEB18 $17 calls (1/2) against my stock position for $.17 credit and these expired on Friday. I will sell APR calls, see below.
• NUGT stock – I was assigned on NUGT at the $31.5 price level. I sold the NUGT 23FEB $32 calls for a $.45 credit and these expired on Friday. I will want to wait on the next bounce up to sell calls against these again.
• DUST – We are out of DUST for the time being.
• BAC – I sold BAC 16MAR $28 puts (2/6) for a $.48 credit. I closed these down for $.05. (2/20)
• GLW – I sold the 20APR $25 puts (2/12) for a $.25 credit
• HPE – I sold the 16MAR $14 puts (2/12) for a $.23 credit. Friday was a huge day for HPE so we should be able to let these puts expire.

We used the recent dip to sell against uptrending assets.

I want to sell the 20APR SLV $16.5 calls for at least $.16 credit whenever possible.

The crypto market is still wringing out the excess of late 2017.

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 current Friday closing price at 274.71, there is a +/- 4.351 EM into this coming Friday. This is larger than normal but smaller than the EM that we saw last week. Remember that last week had a 54+ point SPX EM and the price stayed well within that EM.

The EM targets for this Friday’s close is 279.06 to the upside, and 270.36 to the downside.

I don’t really have any interest in fading the EM this week, because the market is in transition, and we are more likely to see expanded range movements during this type of character.

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:

• BIDU 23FEB 255/257.5 Debit Call Spread (1/29) entered for a $1.25 debit and expired OTM on Friday. This was my one left-over long from the January rally and was almost guaranteed to fail once the correction kicked in.
• MU 16MAR 45/46 Debit Call Spread (2/20) entered for a $.47 debit. I will look for a 50% return.

On Monday I will add the PYPL29MAR 79.5/80.5 or equivalent debit call spread for around $.50 debit. If necessary I will move out to $2-wide spread to get about a 1:1 reward-to-risk.

I will also enter a SPY 20APR 260/259 Debit Put Spread for about $.12 – $.15 debit, as a downside hedge. We could still see a bottom re-test and this is meant as a good reward-to-risk trade with low probability of success.

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 have no positions at this time and need to see the price rally to recent highs again to reload. It’s not just the price, it’s also the implied vol which needs to drop.