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Monday Market Mayhem – China Fires Back in Trade Wars, Trump Tells Dreamers to Stop Dreaming

Well, we survived the Space Debris at least.

Unfortunately for 800,000 children who live in America, they are not surviving President Trump, who is calling for "Caravans" to come and take them away, without the due process or constitutional rights afforded to the other children in their classrooms.  John Oliver handled the sickness of this mess very well over the weekend so you'll either care about this or you won't but, even if you do - what can you do to stop this man?  

When did the United States turn into Vulgaria?  Perhaps it was when we elected the man SPY Magazine used to call "the short-fingered Vulgarian", which is now more apt than ever as the President calls for 800,000 children of immigrants to be rounded up, plucked from their schools and from their homes and sent off to countries they don't even remember and, in many cases, which their families sacrificed a lot to get them out of.

Image result for child catcher caravanWhen I grew up, sending caravans to round up children was the simple plot-premise of a children's movie that immediately told us the rulers of the country were pure evil and needed to be deposed.  There was no question that this was the case – it didn't matter WHY they were rounding up children – rounding up children and putting them in caravans was OBVIOUSLY EVIL!

WFT is happening to this country that we accept things like this.  What exactly is the vision of Amerika these days?  How did a nation of immigrants come to hate immigrants so much?  And yes, you do hate immigrants if you sit silenty by and watch them get dragged out of their homes and deported overseas when the only crime they committed was failing to have proper papers.  Papers please?  Yep, that's the line from every Nazi movie ever made, isn't it? 

Image result for nazi republicanThe Nazi Party was also a Nationalist Party and aimed to stop the flow of immigrants that were stealing jobs and then moving towards deporting those who weren't "real Germans" before the moved on to cleansing the rest of the World at gunpoint.  It took 25 years, from 1920 to 1945 for that cycle to top out – we're only in year two of the Trump Administration and we're already rounding up childeren – who's next?

Happy Easter by the way!  

Meanwhile, over the weekend, our Trade War escalated as China fired back at Trump with tariffs at 128 US products like wine and frozen pork – matching Trump's 25% penalties and going into effect this morning.

“Even though China and the U.S. have not publicly said they are in a trade war, the sparks of such a war have already started to fly,” said an editorial in the Chinese tabloid Global Times, per Reuters.

Needless to say the markets have dropped off a bit this morning and that suits us just fine as we pressed our hedges into the weekend – just in case something like this happend.  This is just round one as China's PMI hit a 4-month low (51) in March, down from 51.6 in February and below 50 is contraction so they can't afford to mess around and let the US dictate their trade policies.  

Also notable this weekend is car manufacturer turned comic, Elon Musk, who tweeted this weekend (and I'm not fooling, but he was):

I'm sure his shareholders, who lost 25% of their value in March and found out this weekend that half (1/2) of all the cars Tesla has ever made are being recalled found this all very amusing.  We've been shorting TSLA for quite some time and my reasons were summarized when they topped out last year:

Thursday Thoughts – Tesla's Emperor Musk Has No Clothes! | HuffPost

Tesla's Earnings Miss – Emperor Musk has no Clothes! | Phil's Stock …

Speaking of scams that are blowing up, BitCoin fell below $7,000 this weekend and we're waiting for $1,000 to buy back in on those.  European markets are closed this morning for Easter and our Futures are drifting lower but nothing drastic so far.  Trump has also been going after Amazon (AMZN) in tweets over the weekend and that mega-corp is down 2.5% so far.

It's a very meaningless day kicking off a very low-volume week and we're still watching the same bounce lines we were last week – a very watch and wait kind of day, on the whole.

 


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  1. I am sure all the evangelicals appreciated Trump's tweets this weekend – that was really the Easter spirit there. I am sure that Jesus would approve – deport 800,000 children! But hey, he is tough on the gay community so that's all good. Disgusting….



  2. I guess that was the plan all along:

    http://nymag.com/daily/intelligencer/2018/03/conservative-economists-turning-back-to-debt-hysteria.html

    In November, a group of Republican luminaries, including Michael J. Boskin, John H. Cochrane, John F. Cogan, George P. Shultz, and John B. Taylor co-authored an op-ed cheering on the Trump tax cuts. Isn’t it a little dangerous to permanently increase the deficit, especially during the peak of an economic expansion? Nonsense, they argued. The effect on interest rates of higher debt “is likely to be modest, given that the United States operates in an international capital market, which means that the impact of changes in interest rates resulting from greater investment demand and government borrowing are likely to be relatively small.”

    Now that the Trump tax cuts have passed, though, they have pivoted to a message of deep concern about rising debt. Boskin, Cochrane, Cogan, Shultz, and John B. Taylor have written another op-ed. It applauds the tax cuts and calls for more. Yet it warns that the failure to cut social spending will lead to catastrophe. Including higher interest rates!

    Yet, no one will call them out for that "inconsistency"!


  3. And that's not scary at all:

    https://theconcourse.deadspin.com/how-americas-largest-local-tv-owner-turned-its-news-anc-1824233490

    Earlier this month, CNN’s Brian Stelter broke the news that Sinclair Broadcast Group, owner or operator of nearly 200 television stations in the U.S., would be forcing its news anchors to record a promo about “the troubling trend of irresponsible, one sided news stories plaguing our country.” The script, which parrots Donald Trump’s oft-declarations of developments negative to his presidency as “fake news,” brought upheaval to newsrooms already dismayed with Sinclair’s consistent interference to bring right-wing propaganda to local television broadcasts.

    This is how democracy dies!


  4. Trouble for MLPs:

    http://sl-advisors.com/the-alerian-problem

    MLP-dedicated funds face an unenviable business decision, and they’re clearly best served by the status quo. Their best outcome is to delay changing their benchmark indefinitely, and hope to convince their retail investors that MLP-only funds remain a viable proposition. The risk for current and future holders is that the shrinking Alerian Index eventually forces them to change, which could be tumultuous. It might be one reason why net inflows to MLP-dedicated funds are flat since last Summer. In addition to the headwinds of corporate taxes (see AMLP’s Tax Bondage), you can add index uncertainty. It’s The Alerian Problem.


  5. STJ – At least we have one of the great economic minds advising the White House.

    "President Trump's new economic advisor, Larry Kudlow, announced to the world on CNBC in late 2007, on the cusp of the most vicious business collapse since the Great Depression, that “recession isn’t even in my vocabulary”. For good measure, on December 4th of that year he declared: “The recession debate is over. It ain’t gonna happen. Time to move on."


  6. Kudlow / Albo – This guys has been wrong all his life… I just can't think of a more incompetent team in recent history. I strongly disagreed with Reagan and the 2 Bushes but they had some (not all by all means) competent people in place. But it's hard to make a case for even one guy in this team… Maybe Mattis! Thin gruel.


  7. Good morning!

    Sorry for ranting this morning but I'm down in Florida and we visited with some Parkland kids this weekend (my nephew and niece both went there) and I met with some Food Bank people from Miami and they are freaking out about DACA – it's happening to them and they can't believe it.  This is going to decimate communities and really fire up the resistance coming into the election cycle.  

    Anyway, back to the markets.  Still waiting for the bounce lines, which are (still):

    • Dow 24,350 (weak) and 24,550 (strong)
    • S&P 2,666 (weak and satanic) and 2,688 (strong) 
    • Nasdaq 6,850 (weak) and 6,950 (strong) 
    • Russell 1,565 (weak) and 1,580 (strong)

    None are even close to weak bounces and the RUT has to pass the 50 dma at 1,550 and the NYSE has to hold the 200 dma at 12,400 for today to be considered at all constructive.

    Sinclair/StJ – Also well-noted by Oliver last night:

    Well, my first Monday off is going well so far, right?


  8. Phil/Freddie & Fannie,

    For your Monday blues :-)

    Are these good to enter at these levels?

    regards



  9. Si/Phil- good call on silver futures, up 1.5k. Since we on the July future, was wondering what’s the price target? I was thinking 17.5


  10. And a nice wheeee by the way! Mondays might be meaningless but a 2% down move on the Nasdaq is still something to ponder over.


  11. It looks like Mondays and Fridays simply cancel each other – you are all set Phil, you can take both days off!


  12. FNMA/Pat – The GOP has been trying to destroy them for years and I'm surprised they didn't try to kill them in this budget.  FMCC and FNMA are both in Government Conservatorship so their profits all go to Treasury, not the shareholders.  They report a negative net worth so it's hard for them to recapitalize and go private again – even if the Government let them.  Trumps tax bill is causing them to take a massive write-down this Q and Trump may use the apparent loss as an excuse to end the programs entirely – so very up in the air though, if they get away from the Government, I like them a lot.

    LOL Rexx, classic.

    Silver/Dave – So greedy!  I'm thrilled with the one-day gain so I'm going to take it.  Can always play again or find something else to play with only 10% of the profits at risk.

    2.25% now, StJ!

    Amazing how fast these markets can turn ugly but nobody around to buy on a negative news day…

    Both days/StJ – That's the plan down the road. 

    I think we've proven with the LTP and the Butterfly Portfolio that we can do pretty well every year just trading one day a month – ultimately, that's our goal!  


  13. Amazon shares fall four percent as Trump renews attack


  14. Thursday's action was very annoying. In hindsight obvious manipulation to make the quarter end not look "so bad." I knew today would be blood red. This quarter will be very bad.


  15. FU GE HMNY IBM OIH LB F HBI SPWR FTR CBI!!!!!!!!!!!!!!!!


  16. who did i forget?


  17. FNSR!


  18. another POS… GNC


  19. what ever happened to Burrben and Craig?



  20. Very thankful for great hedges.  Thanks Phil!


  21. Pace of US factory growth slipped in March


  22. Poking Long /NQ at 6400, tight stops!!


  23. I’m with you Jeff! 


  24. Where are the tweets about how great the markets are doing?


  25. I scaled in and out to 1x at 6385. Stop at 6400 now. 


  26. Yikes! That was quick. Gonna sit and wait for a bit now. 


  27. Jabo you forgot poor TSLA!


  28. Starting to raise my interest in short VXX calls again! VIX closing on 24. 


  29. I wonder how days this year we had drops of more than 500 points! It seems like a pretty common occurence now.


  30. From Briefing :
     

    FNSR – Finisar: Hearing cautious note from BlueFin Research regarding loss of Apple 3D sensing VCSEL business.  


  31. phil, i'd like to get your opinion on what you think the fair value of TEVA is.  TIA


  32. QTR/BDC – Off to a hell of a start.

    You're welcome Knight!

    /NQ/Jeff – Looking good (ish):

    Past the 2.5% mark with an 0.5% overshoot and was just about -3% so very nasty action.  When all the indexes hit their 2.5% lines, you can be pretty sure the buy-bots will kick in for a bounce.

    TSLA/Yodi – That's just sad now.


  33. Sqqq/Phil- should we press on our sept hedges that we wanted to initially? 


  34. if you only trade one day a month for butterfly and LTP what day of the month will that be?


  35. Comments on ABX

    Barrick hasn’t benefited from the recent gold spike. Gold is up 16% since the beginning of 2017. ABX is down 22%. Gold has risen nearly 50% over the past decade; ABX has declined 72%.


  36. SQQQ/Dave – I answered some of the SQQQ questions, I’m not sure which one you mean.  Can you be more specific?

    What day/Millard – I guess if I actually planned it, it would be the Wednesday before expiration day. Realistically though, I would still want to come in on days like today and just doublecheck things to make sure we’re not missing any opportunities but, from planning to be on cruises/safaris and such, I think I can make a go of just those Wednesdays. Maybe will try it with a new portfolio next year.

     ABX/Yodi – I want to really dig into their earnings and try to figure out what it is people don’t like so much.



  37. Salt in the Tea



  38. Long NQ with an avg. 6388 Thinking reducing the position at average or get rid of all together ?


  39. Sqqq/Phil- sorry I must have missed it, I was assuming you wanting to cash out some of the sept spread since we added the may spread?


  40. It feels as though somebody wants the indx down. Just relentless push. Now all I hope for is out of those NQs. I guess…



  41. Dow hitting the 200 DMA! This could get ugly. And bye-bye 2018 gains on the Nasdaq!



  42. so does trump say "just kidding" on the china tariffs tonight and the market goes up 700 pts tomorrow?



  43. Phil, RUT at 200 DMA; Now we need to see if we bounce off ande retrace, or do we go lower, and haf off is the bottom?


  44. And down we go again.

    FNSR/Albo – AAPL making a lot of venfor changes.  INTC took a big hit on their loss.

    TEVA/Lunar – I think it's a bit of a moving target but, generally, they have $20Bn in sales and their peers easily make 10% ($2Bn) and they have been known to make 10% too, when not in turmoil.   That being the case, I'd certainly go $20Bn (10x) for them and that's 1x sales, so still reasonable and they have 1Bn shares outstanding so $20/share is about right.

    /NQ/State – Other than the bounce play, I don't see any reasons to get bullish.

    Just kidding/BDC – Hopefully he says that about the whole last year and walks away.

    Rut/Jasu – 1,487.80 is the official 200 dma but I care more about 1,512 (the 5% line) and 1,440 (the Must Hold line) and between them is the 2.5% line at 1,476.  Looking at the hourly chart, this debacle started at 1,584 (10% line) and we failed 7.5% at 1,548.

    On the fall from 1,584 to 1,440, that's 144 points so call them 30-point bounces to 1,470 (2.5% lineish) and 1,500 – a nice even line to watch.  So we expect support at those bounce lines and we failed 1,500 so, if acts as resistance on the way up and fails, we can expect a break below 1,470 on the way to 1,440 and then we'll want to see those bounces.

    Like I said, today is a watch and wait day but tomorrow we may be able to make some fun bounce trades.  Don't forget – Monday's don't matter  anyway.


  45. Long a couple of /NQ at 6345, risking 10.


  46. Stops up to entry on this move.


  47. Stopped out.  That was quick.


  48. SQQQ/Phil- Just went through the webinar again, so I have the additional SQQQ may 16/20 spread and the half cover Sept 15/20. Judging you mentioned today is a watch and wait day, should we cover the half cover to a full cover or wait till Tuesday and decide on the hedge. Never been really using much hedges over the years as I'm lucky it was low vol untill this year and thank god I've listen to you and set-up some hedges but I am never good and timing to cash in the hedges or generally you should not "reload" them since you mentioned we should "want" to lose it.


  49. Jabob – You asked about Burrben and Craigs.  I think trading futures did them in.  I'm still a novice and don't trade them often.  Only way I try is to pick a spot and use close stops.  I just got whipsawed by having stop too close.  Frequently happens, but avoids the big losses that are the demise of inexperienced traders.

    I based my entry off the very high reading of the put-call ratio.  Got as high as 135.


  50. Monday or no Monday, tomorrow, we might see more de-risking/selling continue on since we are at the beginning of the quarter and earnings are yet to show up.  The macro data – PMI, ISM etc. is tepid to negative at best.   


  51. albo--you are probably right. I think they were FU stock holders too. Not a recipe for good returns.. unless you master Phil's strategies, I guess…


  52. Out of NQ at 6388


  53. Cashy & Cautious. – selling the odd put here and there on large cap dividend paying stocks (e.g. DIS, MO, PM, XOM) as the prices come to me. Using this as a character test of patience and fortitude. Would love to think I could trade futures to catch all the pivot points in the right direction, but too many war stories of innocent victims caught in the cross fire.


  54. ….. and obviously this is not the time to be buying calls (even in spreads, unless there on inverse ETFs/ETNs). Better to avoid the pain now of knowing you are likely to have to adjust them if current market volatility continues. The time for opportunistic BCS buying will come soon enough. Doing nothing is a valid strategy.


  55. Put sales:

    PM 2020 $90 puts @ 8.20

    MO 2020 $60 puts @ 7.65

    DIS 2020 $90 puts @ 6.85

    XOM 2020 $65 puts @ 5.20

    Sell tranches of 25% the #contracts of your final position, every two months for the next eight months.


  56. Nice bottom Albo – just have to work on the timing.

    SQQQ/Dave – I wish I knew the amounts but I'd take the May $16s off the table as they are more than the $4 you could get for the spread and, if I have my numbers right, that leaves you with 20 Sept $15s and 10 short Sept $20s and 20 short May $20s and then see if we get a bounce tomorrow and, if we don't, you buy back 1/2 the May $20s and buy another set of Sept $16/20 spreads (or $18/23 or whatever) as another red day tomorrow strongly indicates you'll need them!  

    Burrben and Criags/Albo, Jabob – Both still active, both busy with other projects.  Not broke on futures – don't start rumors!

    Put sales/Winston – Good plan.  

    As I said last week, the Portfolios and our Hedge Fund are mainly in cash (over 90% in the fund) as we're still waiting for better prices than these and still targeting 2,400 on /ES  – which doesn't seem very far away now! 


  57. Sqqq/Phil- I have 50 may 16/20 spread and 80 sept 15 calls with 40 short 20 calls.


  58. Sorry guys, my best to you both.  Hope to see you back here soon.


  59. SQQQ/Dave – Well that works and not much risk leaving 50 covered with 80 that are half-covered.  The May $16s are $4.60 and the May $20s are $2.40 and all premium so if SQQQ even pauses, it will be a great play or, if they go lower, the May $20s can be rolled to the Sept $28s even at the moment.

    Getting a bit of a bounce into the close and the whole thing could be erased tomorrow morning – we'll just have to see but I think the dip buyers are beginning to realize these rebounds are not automatic.

    Notice that this is not anything like the panic in early Feb but we're already back at those levels!

    Oil is a very tempting short!

    Just added an /NGV8 at $2.80

    We'll see where this bottoms but of course I want to buy again (and this is why we take quick money and run!).

    Could be just getting started.


  60. SQQQ/Phil- so I am learning that you would cash out all the 50 May 16 calls as they are worth >$4 when my spread is only $4(16/20). I realized that at one point my 80 sept 15 calls were trading at $6.2 and my sept spread is $5(15/20) but only half covered. Would it be wise also cash out 40 of the 80 15 calls for $6-6.2 and leaving a 40 sept 15/20 covered spread with naked short 50 may 20calls? (new on hedging)


  61. Phil / Futures Options- After market futures newbie question.  What are your thoughts on using futures options as 'catastrophe insurance' against large event driven moves against an open futures position?  Example, being short oil when the US launches an attack against Iran.  Very, very low probability on any given day, but even one occurrence like this might permanently blow up my portfolio.  I was thinking I could buy OTM futures options to protect against something like this.  Other ideas or just not worth the hassle given such low odds?  TIA


  62. Not a good idea to hold commodity futures over night  the option are not liquid after hour.there are a lot of low volume shenanigans  with futures also  that’s is my opinion take it with a grain of salt


  63. Bertll is right but what one can do is put Phil's usual tight stops of $100 lost, should be okay to hold overnight. 


  64. Bertll- Totally agree, I only used that as an example.  Another Flash Crash on the S&P would also be an example of what Im trying to insure against.

    DaveH- Im concerned that a sudden event based move would gap through my stop level & Id still have a catastrophic loss.


  65. emailmike- a sudden move will surely go through your stop level but then any stocks not just futures will also face that similar risk. So far I have'nt experience such big gap moves in futures, big moves yes but not gap moves… I'll leave Phil to answer on this as he seen way more than me. Sorry cant help much.


  66. Similar question about Sqqq got 50 may 16/20,  40 June 20/26 and 40 Sept 18/28.. So you suggest rolling May 20 to Sept 28 with is about even and then waiting to buy to cover and cashing the May 16?


  67. DaveH- Agreed, its the same type of risk whether stock or futures, but with stock positions I have hedges in place to help offset.  A sudden 5% move on the S&P would be over $6k+ loss per futures contract.  So maybe the answer is to hedge against a sudden futures move with stock options, but I think that would get expensive real fast.


  68. Excellent and appropriate rant, Phil, please don't apologize.

    On another note, a friendly acquaintance gave a fascinating talk that I couldn't get to, but here's the gist: "Kathryn Weathersby, Visiting Professor of History, Korea University,

    The 1988 Summer Olympics were the Republic of Korea’s international debut as a modern, prosperous country. The games’ Opening Ceremonies drew television’s largest audience to date — over a billion people. The Olympics also proved to be a turning point in South Korean foreign relations and in the entire configuration of international relations in Northeast Asia. Just days before the games began, Seoul announced the establishment of diplomatic relations with the People’s Republic of Hungary, formerly a staunch ally of North Korea. The ROK then turned to Moscow, which, strapped for cash, agreed to recognize Seoul in exchange for significant loans and credits. South Korea’s price for such assistance was that the Soviet Union cease its military support to North Korea. When Pyongyang responded to Moscow’s betrayal by threatening to recognize the independence of rebellious Soviet republics, the Soviet Union cut off economic aid as well, demanding that the DPRK pay world market prices for its oil. The post-Soviet Russian Republic continued Gorbachev’s realignment toward the two Koreas, China followed suit, and the North Korean economy imploded.

    As we face another possible realignment following this year’s PyeongChang Olympics, Professor Weathersby will provide some context by recounting the amazing story of what happened in the aftermath of the 1988 Olympics. She will begin with the ROK pursuit of a “north policy” concurrent with its Olympic bid, explaining the origins and logic of this approach. She will then examine Seoul’s successful negotiations to establish diplomatic relations with Moscow and the lasting impact of that historic shift."

    Kathryn Weathersby is a historian of the international history of modern East Asia. She has focused her research on Soviet involvement in the Korean peninsula before and during the Korean War, and on the history of North Korea. She founded and directed the North Korea International Documentation Project at the Woodrow Wilson International Center for Scholars in Washington DC and taught courses on North Korea at the School of Advanced International Studies of the Johns Hopkins University. Currently at Korea University, she is teaching a course titled “The International History of Divided Korea."


  69. Future Trading --  I am Long /SBN8 (3), /KCN8 (2), /NGV8 (2), and /NGH9 (3).  I’ve held several of these positions for weeks/months, is it really that risky?   All comments welcome… 

    I recently sold out of /SBK /NGV and /KCK, but today I had the opportunity to reload when they spiked down.  I am already down $400 on /KCN8, but buying more at $118.20.  I mention this as… it has been a great way to offset some of my losing positions in the Options Portfolio.  Perhaps, it is not for everyone, but I don't find it anymore of a gamble than being in a stock/option that keeps declining.  I would have already quit trading, if I was only doing Options, as my portfolio is sucking wind (-26%) and futures is saving me, as I patiently wait for some of these positions to turn around.  I am down considerably on GE, HMNY, NAK, CHK, FNSR, GNC, FTR etc.  Did I miss any Jabob?  

    I'll keep selling premium, rolling, DD as Phil teaches and in a few short years, I will have a zero basis in the stocks I own which will support my longer term initiative for this portfolio.  But, in the meantime… I gotta do something to fill my day.   

    Belated Happy Birthday Phil…  happy to hear you flew down, that is a very long drive from NY, especially if you are on a time schedule.   


  70. Future trading- If I'm holding longer than a day or so I try and sell premium against my long or short contract. i.e. long an /ES contract, I might sell a call 10 days out or so…..Or if short, I sell an OTM put. This does cut my profitability when the trade goes in the right direction but I sleep a little better at night. I, too, fear an overnight gap down but have been lucky so far……


  71. I have essentially stopped holding any futures overnight after having been burned a few times. I’ve found that the action overnight is generally meaningless and so long as you trade for small wins consistently you can find entries every day. I generally aim to make a few hundred per contract per trade and try to accumulate 1k in gains, after that I stop. With that strategy it’s not necessary to hold overnight, and it really adds up over time. I too use futures to act as a hedge for my options trades and it works nicely. If my options portfolio is down, I’ll make adjustments as needed and offset any costs with futures trading to “zero” my account. Then, just give the options time to mature. 


  72. Good morning!

    Obviously, after a 2.5% drop a 0.5% bounce is just weak so we'll see what happens.  Anything below 2,600 is a joke and 1,500 on /RTY better not be resistance or down we go.  6,450 on /NQ and 23,650 on /YM are other potential areas of resistance but all would be terrible signs if they fail.

    SQQQ/Dave – As I said when we made the trade last Wednesday:

    As an additional hedge, at the moment, I like for the STP:

    • Sell 4 WHR 2020 $125 puts for $12.50 ($5,000)
    • Buy 50 SQQQ May $16 calls for $3.90 ($19,500) 
    • Sell 50 SQQQ May $20 calls for $2.20 ($11,000) 

    That's net $3,500 on the $20,000 spread that's almost all in the money to start and the only way to lose is if the Nas goes up quite a bit from here which, with all these headwinds, doesn't seem too likely.

    This hedge also gives us a buffer to take profits on some of the Sept $15 calls if they spike higher and, if they don't, then the Sept $15/20 spread (80, half covered) can cover the 50 short May $20s and we take $19,500 off the table for a $16,000 instant gain (on cash) while the rest plays out.

    I know I was confusing yesterday as I said we could take profits on the May calls instead of Sept but that's because the market turned much weaker than expected last week and so, rather than killing our Sept spread, which we might still need for protection, we are able to sell the May $16s for $4.50 ($22.500) when we only paid $3,500 for the spread.

    That puts $19,000 cash in our pockets and leaves us with 80 Sept $15 calls now covered by 50 May $20 calls and 40 Sept $20 calls.  Our goal was to take $19,500 off the table and we did that, only this way we still have a pretty strong Sept spread ($40,000+) as opposed to dismantling it – as we were considering last week.

    This is official for the STP, by the way! 

    So, on Weds, we had a $40,000+ Sept SQQQ spread and we were looking for a way to take 1/2 off the table and we picked up a cheap $3,500 May spread to replace the uncovered 40 Sept $15s.  That would give us slightly less protection but shorter term. 

    As SQQQ went up over $20, we suddenly have the opportunity to cash the May calls instead and we still get our cash and now we end up fully covered (+10) on the Sept spread.

    Now we have $19,000 of bonus cash sitting around which we can then use (if the Nas gets weaker and SQQQ goes higher) to buy another hedge, like June 50 $18 ($3.60)/23 ($2) bull call spreads for $1.60 ($8,000) which pays another $25,000 if SQQQ keeps going up.  

    Once those go in the money, we cash another $20,000 worth of longs that can't gain anymore and replace them with longs that can gain 3x.  Also, the June price didn't even include an offset and I don't count the offsets against us because those get dumped into the LTP if they go in the money and become positions there so MAYBE a problem there later, but never a problem for the STP!

    So, Dave, yes, $6.20 was good money for the Sept $15 calls and there would be nothing wrong with going that way but my way plays for the bounce on SQQQ and, if the Nas comes back 100 points or so, then we can buy back the short May calls cheap and we'll be back where we started, with the long Sept spread and we can play this game over and over as the Nasdaq gyrates – taking advantage of the short-term moves without sacrificing our long-term protection.

    Futures options/EMike – Too risky for me or rather, too expensive.  I'd rather just play the futures for quick in and outs and, otherwise, I much prefer my nice SQQQ or TZA spreads, which I can milk the occasional $20,000 out of when the market gyrates.  There's nothing wrong with using them for catastrophe insurance but I put faith (maybe foolishly) in the 10% breakers giving us time to react. 

    By the way, I certainly wouldn't short futures options – too easy to get burned and that leaves only the option of being the sucker paying the premium, which you know I don't like.

    Rolling/Millard – Not a suggestion, looking ahead just in case we get burned by a move up but the fallback position of having 40 SQQQ $15/28 spreads that pay $52,000 is not something I'm worried about, right?

    NoKo/Snow – I think we may get some genuine progress with them, little KIm may be going for a Peace Prize…

    Good trading Grass, way to ride the waves!

    Also good strategy by Jeff – many ways to play, you have to find what suits you.

    Sun, I rarely hold index futures overnight.  For that kind of protection, I prefer my long-term hedges and use the Futures for fine adjustments.


  73.  Thanks Phil, Jeff, and Sun for the input on how your trade.  Reading how others approach it, helps with my own trading.  Appreciate it.