No one told us markets could go down? This is an outrage, I demand an investigation – TURN THOSE MACHINES BACK ON!!!
Has it already been a week since I said "Stop the Rally, We Want to Get Off"? As I noted in that post, we began our list of 12 Long Put Plays for Members on Thursday of last week (near the end of what I called "A Weak Week of Denial") and some have already doubled while others, like PCLN, have gotten even cheaper, which only makes us love them more…
I concluded that this rally was fake, Fake, FAKE and gave my reasons on Friday so no point in going over them again – now we're just watching and waiting to see what sticks as we haven't actually done a lot of technical damage (see Dave Fry's chart) – Yet!
Although we were TRYING to get bullish on Monday, we did so only after setting more aggressive targets in our Weekend Review of the 5% Rule (see post for details and levels) and by 10:09 on Monday, our first trade idea in chat was the very bearish TZA spread that I featured again in Tuesday's post, which was the April $17/18 bull call spread at .42, selling the April $17 puts for $1 for a .58 credit. TZA finished at $18.39 yesterday and the spread is now .54 but the short puts are down to .65 for a net gain of .47, which is 81% in 3 days and a good way to offset the 2.3% drop in the Russell – isn't leverage fun?
What was not fun is what happened to people who trusted Credit Suisse to run an honest game with their TVIX instrument. As noted by ETF Digest's David Gillie, an ETN is an unsecured, unsubordinated debt security with significant basis on the credit rating of the issuer. Although ETNs may be named to indicate tracking certain futures markets or indices, due to the fact that their holdings are credit notes rather than tangible assets, such as ETFs, their price becomes largely supply and demand based rather than based on underlying holdings. As Kid Dynamite points out – it does say right in the TVIX prospectus:
“The long term expected value of your ETNs is