Dec 13 – Where have I been!?

Hi everyone,

Been a very long time since my last post. I go in these ruts (no pun intended) usually when I am traveling which is antithesis to the point of this blog. What happens when I travel? I get way behind in every aspect of my life. I have a business that I still have obligations to and I have to manage the trades of which at some points I have 13-14 different ones on. I have to find a way to keep this active while traveling. I have a 3rd kid on the way so I think I’ll have less traveling in my short term future and more at-home time 🙂

The market hit a historical RSI on the DOW of 89 and is just short of the 20k target. What a damn move. What’s been going on with trading since I last posted? I didn’t hit any of the expected targets I had 🙂 The way I trade means that any upside move of about 5%+ in a 45 day cycle effectively neuters and kills my trades. We’ve had that since October and then some. But I’ll go through some of what I did

On election night, I had entered with a more M3 like structure, flat to the upside with calls and futures that I bought right before. Expecting a Hilary win and a subsequent rally. Then on election night it was clear DT was going to win and the futures limited down at -5% (-7% from the futures high that night). On the bounce to about 2070 I decided to remove the futures upside hedges thinking we’d have volatility and to help protect the downside. Big mistake. The market never looked back and we have now hit 2275 in a month. Somewhere around 2150 I added future hedges again to help with the upside after reviewing all the sources I have..they helped but again I removed them too early at 2215/2220 with expectation to normalize the trades and get them back to a traditional structure. Right now all my expirations have been blown through on the upside (Jan and Feb). I had some reprise and recovery about a week ago when RUT and SPX had a down move and I got out of things or adjusted but it wasn’t enough. The last upside move completely took out the upper end. Likely that my Oct-Jan are dead months re P/L (but I guess that’s not too bad given the historic size of the moves eh?). I mean the RUT is up 47% from its Feb low and up 22-23% since Trump? WTF!

Here are how they look for January:

I need to add more upside hedges to the one trade and add some more theta closer to the money as I am now entering the sea of death. I want to wait until after the FOMC tomorrow. We are insanely over-heated, at historic levels on all aspects (why is this a common theme the past 12 months?) so I am being a bit more patient. My guess, we probably hit 2300/2315 area before putting in a major top. The Russel already hits its yearly pivot and hasn’t had strength to match the SPX, DOW and Nasdaq. Let all of them hit their targets and we probably start moving down as the Trump honeymoon starts to damper into his inauguration.

When RUT hit 1393, I sold call credit spreads and I am doing the same with SPX at 2172 on every large push up. Looking at Feb 2425/2400s and Mar 2450/2425s. Not convinced that we blow by all the yearly pivots and continue up past Trumps inauguration this overheated nor do I think his economics will come to fruition. Rallies are built on hope and this is just what it is. The guy is a firehose on twitter and I don’t think everything is just roses and pink elephants through his inauguration and into March. My stop will be around 2340 which is 15-20 points above where I think we top out. On any large dips I’ll likely remove risk and take profits.

More to come on Feb trades soon…