Daily Market Newsletter

I have no positions at this time. Not the right type of market for these trades. As we can see by the price blowing through the EM on a weekly basis, IV < HV these days.

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 or periods of elevated volatility.

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 20APR $16.5 calls (2/26) for $.17.
• NUGT stock – I was assigned on NUGT at the $31.5 price level.  I want to sell 29MAR $31.5 calls for at least $.30 if the price rises far enough.
• DUST – We are out of DUST for the time being.
• 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. We will let these puts expire tomorrow.
• XLF – I sold the 20APR XLF $27 puts for $.41. I will look to close these for $.05

No trades at present, other than continuing to look for $31.5 calls to sell for at least $.30 in the 29MAR series.

The crypto market is still wringing out the excess of late 2017. A ‘lower high’ was printed on BTC and this might be the beginning of a quick death-spiral to knock out the rest of the weak hands. The next rally will have zero participants, as it should be on any good rally moving into “disbelief” phase.

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 278.87, there is a +/- 4.353 EM into this coming Friday. This is larger than normal but not as large as last week’s EM. Friday is ex-div so this somewhat complicates the situation.

The EM targets for this Friday’s close is 283.22 to the upside, and 274.52 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. Last week’s EM of +/- 5.605 was absolutely eviscerated to the upside. Today we saw the lower EM tagged.

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:

• PYPL 29MAR 79.5/80.5 Debit Call Spread (2/26) entered for $.52 debit; I closed the position (3/15) for an $.83 credit. This gave me a net profit of $27/contract, or a 52% return on capital.
• SPY 20APR 260/259 Debit Put Spread (2/26) entered for $.11 debit. We’ll hold for deeper moves.
• TWTR 29MAR 33/34 Debit Call Spread (3/5) entered for $.51 debit and this position closed for an $.82 exit, literally the second that I stopped recording my video today. This gave me a net profit per contract (after commissions) of $27/contract, or a 53% return on capital.
• LUV 6APR 59.5/60.5 debit call spread (3/12) entered for $.50 debit.
• MSFT 6APR 96.5/97.5 debit call spread (3/12) entered for $.51 debit.

I’ll attempt to secure a 50% return on all of the call spreads. No additional trades for now.

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.