Daily Market Newsletter

I have no positions at this time. Not the right type of market for non-directional trades.

I have no remaining positions. This is normally a perfect time to be selling calendar spreads against the RUT or SPX due to the exhaustion levels, however with my most recent experience with them in September, the effort was barely worth the hassle since we’re selling 6% vol and buying 7.5% vol against it. I might target higher IV underlyings to overcome this, at the risk of seeing greater movement.   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.” 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.
• NUGT stock – I entered the NUGT 26JAN $30.5 puts for $.31 credit (1/18) and closed these (1/23) for $.05.
• DUST – We are out of DUST for the time being.

I want to trade against any pullback in BAC and HPE. I’m not enthusiastic about any other stocks right now. We’ll look for the next pullback in order to sell more NUGT positions.

Here comes the re-test of the bottom, Crypto is squeezing out the recent weak hands that bought in December.

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.” Here is a recent video which is “How to Handle the Crash”

Viewing the SPY from the current Friday closing price at 280.41, there is a +/- 3.223 EM into this coming Friday. This is above normal compared to the average EM that we’ve seen this past year.

The EM targets for this Friday’s close is 283.63 to the upside, and 277.19 to the downside.

With this morning’s test and “reaction” of the EM, I faded the upper EM at around 0953a ET with 26JAN 283/284 put spreads bought for a $.39 debit, and I closed this trade for a $.65 credit at 1307 ET. That gave me a net $22 profit per contract, or a 56% return on capital after commissions. We probably would have done much better with long puts but that wasn’t in the plan on Wednesdays. No more fading this level this week.

I have the following current positions:

• SPY 31JAN 274/276/278 Ratio Butterfly (1/11) was entered for a $.30 credit. I will hold this trade to expiry if necessary.

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:

• SPY 31JAN 261/262 Debit Put Spread (12/29) entered for a $.12 debit. I will look for a minimum 100% return from this trade after commissions.
• SPY 9FEB 271/272 Debit Put Spread (1/16) entered for a $.10 debit.
• MCD 9FEB 175/177.5 Debit Call Spread (1/17) was entered for $1.10 debit; I will look to close this position tomorrow.

There are a few setups showing into this week, but I’m not enthusiastic about any of them. I’ll need to close down MCD by Thursday.

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 currently have the following positions in play with this strategy:

• SPY MAR18 240 long puts (12/20) – I entered this position for a $.94 debit