Big Reversal Yesterday

Yesterday I started a new chart of the day series to record this epic move, which now looks like it may be a short lived series. We did however go on to make another all time high after my morning post yesterday. The new all time high put in on the S&P 500 via the /ES was 1,685.75...the day started out very well for the bulls until fear finally showed up in the market bringing with it close to a 40 point reversal on the day:

Before we made any new highs on the session this morning I went ahead and sold a 1,610 put for 20 points against my much publicized short /ES position. I also bought in my short 1,555 put for a small gain as I continue to believe and operate that staying small with no more than one contract of exposure the prudent thing to do in this trade. My new effective short price as of the close yesterday is 1,635 and my aggregated position looks like a giant short call spread:

Looking at the risk profile above you will notice that I have hedged off my risk at the 1,700 level via a long call. Additionally although I sold the 1,610 put I do own a 1,600 put that keeps me positioned well to profit for an accelerated move to the downside. And just for the record if I were to sell out my long call and put, my effective short position would be around 1,640, but that would also expose me to unlimited upside and downside risk.

To date I have collected a total of 80 points over 26 trades. And as I write this the market is about 100 points off where I got short around 1,555.

Good Luck Trading!

In The Money Trades

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WOW! I think that sums it up

Many of you have been reading this blog may have noticed that my blogging frequency has increased over the past few weeks as I got short the market. As you can imagine I am down money since getting short the market, this is the time when most people pull away from posting. But my goal is to stay active and involved and show you that trading is not always rainbows and butterflies. It is times like these that the things I have been sharing over the past couple of weeks are so important. You need to trade small relative to your account. I have a decent short position in the market and my portfolios are set up to make some awesome returns if we finally turn lower. But something I would like to point out is that my account is 70% Cash. I learned a long time ago how important it is to live by the rules you preach.

Because of my discipline I am able to continue to hold my positions, I have time and capital on my side. I can't stress enough how important it is not to get to big.

Now onto the market analysis:

The /ES has broken through the 1,600 level with strength. The high put in this morning is 1,611.75 as I write this post. Obviously with all time highs, there are no levels of resistance to the upside. The market resilience is very impressive to say nonetheless. There is no fear in the market and with a breakout above 1,600 this market could have an extended move to 1,630 in the short term. Its scary when everyone wants to be long the market. Now obviously I am a bit biased with a overall short position. But take a look at the longer term chart and see what's happened the last decade when markets were breaking out to all time highs:

Is the 3rd time going to be different?

I don't consider myself a technician but, a google search for triple top yields results of a very rare and bearish chart pattern???? Anyone following this blog have any comment from a technicians perspective on this possible chart formation?

Where do we go from here?

Good Luck Trading!

In The Money Trades

And 1 favor that we ask: 

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Short Premium in VXX

Believe it or not, but the market continues its grind higher only 3 points off its all time highs after a nice move lower during yesterdays session. If the market continues to grind higher this does not bode well for my overall portfolio as I am leaned to the short side. I think as I write this I am about 200 SPY deltas short. With that said I decided to sell a 19/20 put/call strangle with a kicker buying the 23 call to define my risk to the upside.

Now you may be asking yourself why I would add more negative deltas. Well my thought is that we are either going to have a move that finds velocity to the downside which will cause volatility to pop (think February move with 35% pop) which would be good for my overall portfolio and leaves my max risk on this trade at $90 to the upside. Or the other scenario is we keep grinding higher with little one day sell offs with small pops in vol in which case I don't think vol really goes anywhere between now and Jun expiration. My break even to the downside as it stands is at $16.46. The max gain is around $510.

And for full disclosure, one thing I will be looking to possibly do is sell some 30 calls against the 23 that I bought on a decent pop in vol. This would effectively move my break even to the upside to $30 (a 55% move in vol). These calls are currently trading for about $0.30 and would need to move another $0.20 before I decide to sell them.The new risk profile would look like this:

Good Luck Trading!

In The Money Trades


And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Who buys at all time highs???

As I write this post this morning the markets are back within arms length to ALL TIME HIGHS! I really don't know how you can buy all time highs. If history tells us anything, buying all time highs whether in the stock market or in the housing market or any other market for that matter is a losing trade. But we have to remember that the markets can stay irrational for longer than expected. If you don't get too big for your pants, you can weather the storm.

In continue to be a difficult environment to sell option premium given the super low volatility environment. 

Positions: Short /ES, Short JNJ, Short GME, Long CLF, Long NLY,

Markets at all time highs are not great on my portfolio but I do have 2 pieces of saving grace:

1) I have positive theta

2) I am long CLF and that is offsetting negative P&L as we move higher.

Good Luck Trading!

In The Money Trades

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!