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Friday, March 29, 2024

Monday Mop-Up

We held up all right on the whole.

I cannot stress enough the value of mattress plays.  Watching the XAL kept us out of trouble all day as the airline index dragged the markets down and at 12:25 I decided the divergence wouldn't last but, rather than panic out of our positions, we took the DIA $130 puts as a cover for $1.55As I said at the time: " XAL is in a power dive and you cannot convince me that this does not matter."  We later set 20% stops on our closer calls but, when few of them actually triggered we picked up some more positions (hopefully) at the bottom and sold our DIA's for a .20 profit, which may not seem like much but as a cover it effectively reduces the basis of our exposed puts by .20 – a nice extra cushion to have.

The worst thing you can do with options is go in and out of positions (mo plays aside) as you pay a hefty commission in addition to often losing a nickel on the spread.  Our mattress plays are momentum puts on the market that are, by definition, already covered by your calls (or puts if you're a bear) and they help us ride out short-term reversals.  We would never be able to hold some of our choppy calls without some protection on the dips.

While we didn't lose a lot, we did lose our uncovered GOOG calls so we'll have to reassess that stock today.

So the markets held up pretty good despite GM blaming sub-prime for their losing leadership to TM (got 'em).  At 2:05 I said about this: "I’m not saying panic but this is the kind of talk that can cause a big pullback. Let’s not forget that GM has no credibility though but now reporters will be asking everyone what they think about this.It was the lack of a major reaction to this news that caused me to be less bullish into the close.

On the whole, our indices held up pretty well:

 

 

Day's

Must

Comfort

Break

Next

Index

Current

Move

Hold

Zone

Out

Goal

Dow 12,919 -42 12,468 12,600 13,000 13,500
Transports 2,901 -4 2,825 2,900 3,000 3,250
S&P 1,480 -3 1,430 1,460 1,500 1,550
NYSE 9,660 -36 9,218 9,465 9,600 10,000
Nasdaq 2,523 -3 2,454 2,500 2,600 2,750
SOX 484 -3 477 490 500 560
Russell 827 -1 803 820 850 900

As usual, the SOX and Transports are killing us but, it was a very bad oil day (up $1.78) and the Transports didn't collapse so – YAY!  The SOX also held up well enough against a declining Nasdaq and I had faith (justified) that TXN would pull us out of that slump and we even doubled down on MRVL just to be sure.

Oil was a disaster but we made a quick momentum play on TSO $110 puts that gave us a small profit before a well-timed Nigerian uprising (just before the NYMEX close) forced us to take the money and run.  We had VLO $67.50 puts too but they went nowhere and the whole trade left us up net .20 – not bad for a few hours but not enough – yet.  As I said when we pulled them – we live to day trade another day!

They ran the barrels up to 330M but the $65.89 price that the June contract finished at is still significantly lower than the $67.50 we were at just a month ago (on the last contract rollover) and the majors (if not the refiners) took note as COP, CVX and XOM all gave up nearly a point.  We're certainly not holding our breath but I think they're worried that earnings will not justify these lofty values.

Gold just seems tired but survived a brief dip to $690 and bounced back on the same Nigerian news – someone got some good bang for their buck over there – thank you Rent-A-Rebel! 

The dollar made a little bounce of it's own but ended up just .07% for all its troubles, now at 81.74.  That's down 2% from last month so anything less than a $1.20 GAIN in crude is a real loss of ground for them.

I'm still cautiously optimistic but the emphasis is on cautious!

 

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