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 2FEB $31.5 puts for $.31 credit (1/26) and will look to close these for $.05.
• DUST – We are out of DUST for the time being.

If we’re patient we’ll see pullbacks across the board so now’s not the time to chase.

NUGT got crushed hard this week so it’s not unreasonable to think that I might have an assignment in the near future. I do not want to see the price undercut the $30 level.

The crypto market was very weak today and we might be seeing the final, eventual capitulation that is so necessary after December’s blow-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.” Here is a recent video which is “Top Five Safest to Invest in 2018”

Viewing the SPY from the current Friday closing price at 286.58, there is a +/- 3.296 EM into this coming Friday. This is above normal compared to the average EM that we’ve seen this past year, and actually larger than last week’s.

The EM targets for this Friday’s close is 289.88 to the upside, and 283.28 to the downside.

I faded the upper EM last week and feel fortunate that I was able to secure a profit on that trade before Friday’s eventual explosion. During the four trading weeks that we’ve seen so far in January, the price has obliterated the upside EM in three of them.

I will be traveling in the latter part of this week so I have no interest in trading this strategy this week.

I have the following current positions:

• SPY 31JAN 274/276/278 Ratio Butterfly (1/11) was entered for a $.30 credit. I closed this position for a $1.67 debit. We have not been able to get this strategy to perform in the midst of a euphoric run to the upside.

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 let this position expire OTM tomorrow.
• SPY 9FEB 271/272 Debit Put Spread (1/16) entered for a $.10 debit.
• BIDU 23FEB 255/257.5 Debit Call Spread (1/29) entered for a $1.25 debit.

No other positions. I do not believe that I will play tech earnings this week as I am traveling at the end of the week.

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