TradePRO Strategies

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#VolatilityPRO

I have added some uncovered risk to the VIX program, however it is covered into the close, and covered intraday on volatility spikes - but still technically, for brief periods of time, uncovered. Please ensure there are no margin limitations or issues on your end. You should have 50 contracts now on the short VIX position there.

Following futures positions of non-commercials are as of Oct 10, 2017.

10-year note: Currently net long 192.6k, down 39.6k.

Market participants constantly rerate expectations. They have to. The related variables are dynamic and constantly changing themselves.

The nimble ones are quick on the trigger. The slow ones sometimes can have their head handed to them.

Just the nature of things.

Back in 2000, U.S. stocks posted a major peak in March. Hindsight is always 20/20, but those who bought in late ’99 or early ’00 probably did not think they would essentially become the proverbial greater fools. Ditto with another major peak in U.S. stocks in October 2007.

Or, take the low in 10-year Treasury yields in July last year. Yields bottomed at 1.34 percent back then – successfully testing the lows of four years earlier. Many thought – yours truly included – rates were still headed lower. Those who failed to react quickly to changing sentiment got hurt. TLT (iShares 20+ year Treasury bond ETF) has shed nearly 10 percent since.

In this context, what is going on in the fed funds futures market is apropos here.

Just a month ago, traders gave scant odds for a 25-basis-point hike in the December meeting. Now, it is almost a lock, although the odds dropped from 92 percent last week to 82 percent this week. The FOMC minutes for the September 19-20 meeting released this week pretty much confirmed that a hike was imminent. Traders adjusted quickly, as FOMC members began jawboning strongly.

The lesson in all this is that it is never a good idea staying wedded to a position, particularly if – as is the case with U.S. stocks currently – investor sentiment is effusive, valuations are elevated and have had a great run.

30-year bond: Currently net long 27.6k, up 12.8k.

Major economic releases next week are as follows.

Tuesday brings industrial production (September), the NAHB housing market index (October), and the Treasury International Capital (August).

U.S. capacity utilization rose 0.4 percent month-over-month in August to 76.1 percent. This was the sixth straight up month following 24 down months out of 25. Utilization peaked at 79.2 percent in November 2014.

Home builder sentiment in September dropped three points m/m to 64. March’s 71 was the highest since June 2005.

In the first seven months this year, foreigners net-purchased $45.5 billion in U.S. equities. On a 12-month rolling total basis, January-July purchases totaled $58.7 billion – down from $94.3 billion in June, but the trend is up. In February last year, they net-sold a record $142 billion.

September’s housing starts are due out Wednesday. August fell 0.8 percent m/m to a seasonally adjusted annual rate of 1.18 million units. The cycle high of 1.33 million – the highest since August 2007 – was reached last October.

Existing home sales for September are published Friday. Sales in August fell 1.7 percent m/m to 5.35 million units (SAAR). March’s 5.7 million units were the highest since February 2007.

Crude oil: Currently net long 435.6k, down 15.4k.

After losing the 200-day moving average but finding support at the 50-day ($49.23/barrel) last Friday, spot West Texas Intermediate crude ($51.45) started the week by reclaiming the former.

Near term, there is room for continued rally toward $52-$53.

That said, if weekly overbought conditions prevail, it is likely the 50- and 200-day get tested again. Merely $0.32 separate the two. Right around there lies a rising trend line from June this year – a must-hold for the bulls.

For the week ended October 6, the EIA report showed US crude stocks continued to drop, down 2.7 million barrels to a six-week low of 462.2 million barrels.

Distillate stocks dropped as well – down 1.5 million barrels to 134 million barrels. This is the lowest since June 2015.

Gasoline stocks, on the other hand, rose 2.5 million barrels to 221.4 million barrels – a five-week high.

Crude production decreased 81,000 barrels/day to 9.48 million b/d. The prior week was a 26-month high.

Crude imports, however, rose 403,000 b/d to 7.62 mb/d – a six-week high.

Refinery utilization rose 1.1 points to 89.2 percent. Pre-Harvey, utilization peaked at 96.6 percent and bottomed at 77.7 percent in the aftermath of the hurricane.

E-mini S&P 500: Currently net long 140.5k, up 39k.

U.S.-based equity funds in the week to Wednesday pulled in $2.9 billion (courtesy of Lipper).

In the same week, a total of $319 million moved into three S&P 500-focused ETF’s, with SPY (SPDR S&P 500 ETF) losing $892 million, and VOO (Vanguard S&P 500 ETF) and IVV (iShares core S&P 500 ETF) attracting $71 million and $1.1 billion, respectively (courtesy of ETF.com).

In a doji week, the cash managed a 0.15-percent rise, with some signs of fatigue beginning to show up. Yet, as overbought as it is, the index has not tested the 10-day in the last 11 sessions.

Besides the 10- and 20-day, the first layer of support lies at 2509, which it broke out of two weeks ago.

In the meantime, the ratio of Investors Intelligence bulls to bears this week posted four – a rare reading. This was the 16th such occurrence going back four years. If past is prologue, this can mark at least a short-term peak in stocks.

Euro: Currently net long 98.1k, up 7.2k.

On Tuesday, Catalan did not immediately push ahead with independence from Spain. This set in motion a relief rally in the cash ($118.21).

But the issue is far from resolved. Mariano Rajoy, Spanish prime minister, has given the Catalan government until Monday to clarify whether or not it has declared independence. He has the option of invoking article 155 to suspend Catalan’s autonomy.

During all this, the euro, after finding support at the daily lower Bollinger band last Friday, rallied this week, but only to face resistance at the 50-day ($118.44), which also represents short-term horizontal resistance.

Gold: Currently net long 200.1k, down 3.7k.

Going back seven years, $1,300/ounce on the cash has been a level where the bulls and bears have consistently fought a tug of war. Most recently, the metal ($1,304.60) broke out late August, fell back under it a month later, only to recapture it this week. The 50-day lies at $1,300.71.

There is room to rally on the daily chart.

Flows probably need to improve.

In the week through Wednesday, IAU (iShares gold trust) lost $37 million, while GLD (SPDR gold ETF) was essentially flat (courtesy of ETF.com).

Nasdaq 100 index (mini): Currently net long 30.1k, up 872.

On Thursday last week, the cash (6092.45) broke out of nearly two-and-a-half-month resistance at 6000. This likely prompted flows into QQQ (PowerShares QQQ trust), which during the week ended Wednesday this week took in $473 million, reversing outflows of $1.4 billion in the prior two (courtesy of ETF.com).

The index arguably has poked its head out of a rising four-month wedge. A convincing breakout can potentially cause short squeeze, as short interest on XLK (SPDR technology ETF) in particular remains elevated.

Russell 2000 mini-index: Currently net long 12.9k, up 17.4k.

The cash (1502.66) is sending out signs of fatigue, with sideways-to-slightly-down action in the past nine sessions. The bulls hope this ends up acting as a flag, but may not turn out that way. At least near term, the path of least resistance is probably down.

The risk facing the bulls is this. The Russell 2000 rallied 12-percent-plus since reaching an intraday low on August 18. Non-commercials lent a big helping hand.

As the index proceeds to unwind overbought conditions, the bulls can get tempted to lock in gains.

In the week to Wednesday, IWM (iShares Russell 2000 ETF) and IJR (iShares core S&P small-cap ETF) combined lost $110 million – the first outflows from these ETF’s in the past four weeks (courtesy of ETF.com).

US Dollar Index: Currently net short 3.7k, up 402.

Near-term resistance at 94 held on the cash (92.93). As did broken-resistance-turned-support at 92.50-60.

Daily indicators have reached the median. If there has been a real change in sentiment toward the greenback, the bulls should be able to defend this support. The 50-day lies at 92.77.

Except, non-commercials continue to remain in wait-and-see mode.

VIX: Currently net short 174.7k, up 4k.

Daily Bollinger bands on the cash continue to narrow, with the upper bound having provided resistance several times in the week. In the meantime, the 10- and 20-day are converging, even as the 50- and 200-day are flattish.

This is an opportunity for volatility bulls. Remains to be seen if they can cash in. Non-commercials are net short VIX futures up to their eyeballs – record this week – and, if squeezed, can provide a huge tailwind to the cash.

Thanks for reading!

#NasdaqPRO

Here’s what to expect this week…

I have neutralized the NQ futures positions here. I am pricing in a downturn in the Nasdaq soon, however we think this week could remain quiet - so we have decided to get in on the premium game.

We are 4 long NQ and 4 short = very little actual margin use. We won’t be shedding the futures positions until we are clear of this weeks options positions, which could be at the end of the week - it all depends. We will, however, add to the SHORT side of this position in overnight trading if it is necessary to hedge our option plays.Currently I am looking at QQQ 29 DEC calls to sell some oct20 covered calls around the 150 barrier to expire this week.

Here’s what you need to know regarding margin:

Options/Stocks

Roughly $8K will be taken up tomorrow on the long calls. Intraday we could throw around $50,000 worth of SQQQ to hedge, but it will be alongside options hedges. This is because we will close the stock positions out before the close, and maintain the option hedges if we need to - a smart use of the margin. If you are already scaling the strategy, there is really nothing to worry about.

On the futures side, again, we are neutral for a reason until we are clear of these new plays.

Collective2 says I am currently using $50K worth of margin, but this is hugely incorrect. Since we are neutral with different contracts, in reality it’s less than $1K of margin in active use. This will change if I add another 1-2 contracts short during this period, but not by much - i.e. roughly $14K in additional margin.

In short, I expect to use anywhere from $8K-35K worth of margin to be carried off active hours moving forward here and potentially as high as $50K worth of intraday margin to be implemented if the SQQQ hedges kick in.

Those last two sentences are the important part.

Have a great day.

#RockstockPRO

I am currently reviewing the rates market for the next trades. TBT and TLT primarily for this account… will likely be looking for a long TBT position shortly, but will be waiting on some signals first.

#VolatilityPRO

I do have strong signals today that volatility has carved out some type of base. This is the first time I have had these signals in about two weeks. I am pricing in a VXX move to roughly 36 in the coming 5 trading days. This is good news for the system, and I will post updates on any important executions.

I have been modeling XIV in periods of very low volatiity (like the last week). Two of my indicators gave reason for caution for the rest of the week.

Agreed. However, overnight markets are still surprising me. VXX 34.50 will prove an interesting barrier, the most interesting we have seen in two weeks, outside of that - who knows.

Unbelievable market strength this morning - surprise!

As noted two days ago, we are not surprised the markets have sold off for mysterious reasons. I have also been starting threads warning people about volatility - of course only to be attacked and berated the entire time. That’s okay!

Well… not so mysterious reasons today.

Today marks the 30th anniversary of Black Monday. The news wires are also trying to blame spain tensions, China GDP growth at 6.8% or earnings disappointment, but those are just the usual finger pointing that means absolutely nothing. The reason for this is superstitious, many traders pay attention to things like this, the ones higher up even pay attention to astrology. You won’t hear that report in the news! Volatility signals two days ago simply pointed to the buyers coming in to hedge their portfolios.

Here’s what to expect.

#VolatilityPRO

This will actually be our best performing program today. I knew it was possible that the VIX would pop - so we initiated our new short positions 100% covered with the new barrier @ 12 versus @ 11 as we had last week - this was a great move as the VIX is currently trading @ 11.33 - We were also long 150 VXX contracts into the close, thus we are over covered at this time. I am likely to add more to the position uncovered, which will move into covered mode into the close, or on an intraday basis depending on fills. This may or may not happen today - further activity.

#NasdaqPRO

Expect 1-2% drawdown here.

Our Nasdaq futures hedges triggered in a not so perfect zone today and I cut them for a loss this AM. However, what if the market did melt down? That order would have pinned the DD @ 2% where it would have stopped and others would have blown up. This is worth the insurance, however ideally in hindsight the order would’ve worked best triggering around 6090 but we are currently trading now at 6085 - so this was a tight level. The point is - the program was hedged for this type of event, and today we paid a small fee to ensure your account doesn’t blow up.

Here’s what to expect trade wise.

I will be initiating a bull put spread on the QQQ 147 barrier expiring end of week because I already have signals this sell off has shown signs of reversing. More than likely - this turns into a BUY THE F* DIP montage as we all have heard this screamed out for the past 4 years. BTFD. Yes, days like today freak people out, but more than likely, funds buy this. This is not real selling, it’s just real selling based on what we have seen the past two months. When the trade expires I will consider getting long NQ futures / and or continuing to sell premium on the QQQ call position. We are closing out the SQQQ hedges and DEC 147 puts here. We could’ve bought more SQQQ into the close, I will consider that an error on my end.

#OptionsPRO

Expect 1-3% drawdown here.

Most of the options barriers this week should expire worthless, I think Alibaba will hold and pay off nicely. I may close out all covered call positions here for a profit. NFLX and APPL will weigh down the portfolio, however I will be adding intraday hedges that will trigger puts if the market melts down. There is no way on an options program like this can not take on a drawdown on days like today, it’s just the extent of that drawdown that matters. This should be the worst performing program today.


With that said… traders needed a day like today badly, I am looking at my signals now and I do believe this sell off is contained, that’s not to say it won’t change, but it does look this way right now. If the market behaves orderly at these levels, it opens up significant opportunity for me next week and to close out the month.

I will be very very busy today and cannot answer questions in PM unless from current subscribers.

My programs are free, and they come with constant communication and hedging.

Please be safe today and do know that it’s a good day to evaluate your traders. 1-5% DDs on a morning like this are reasonable depending on the program, beyond that is not reasonable. A median DD on a day like today of about 2.5% would be ideal, especially if you notice the trader had hedges on, whether they won or lost ,doesn’t matter, they should have had something trigger overnight if they also use futures. Consider your open risk and evaluate the programs. If you would like an opinion on a program and their activity today, feel free to send the information over.

As I expected, markets have stabilized quite a bit… volatility dropped right back into range. Will post an update near end of day on potential overnight hedges, because something was up this morning, and none of the answers make sense.

image

I am comfortable and fine with the DDs today on a semi-black swan event this morning. Volatility lost, badly.

Two days ago:

This happened today.

This also happened today.


Markets look good here. With ES at new highs this did indeed turn into BTFD. This is often the case with volatility events, they are the reversal days to watch out for. You need to be cautious with hedges, just as much as you care cautious with positions, which is why our #NasdaqPRO program cut that NQ futures short early on. And which is why most people don’t hedge - they lose too much on the hedges.

Moving forward…

Moving forward…

#NasdaqPRO

We are in a great position. Currently I see $300K in AUM which means there must be at least a few people following. I hope you are enjoying the free fully hedged and communicated signals. Thank me later.

#VolatilityPRO

We are back to the drawing board. Ideally, today we did want to see volatility at least hold mid range but VXX closed down into a NEW LOW… However, I do still have full confidence, as we have neutralized quite a bit of action here. The puts we have on the system will go into the money soon, the current covered short setup is slightly overweight, which will take care of any decay on the core long position. We will get further overweight those short calls, and then possibly keep adding some short spreads VXX on a weekly basis.

#OptionsPRO

I will be focusing on NFLX and APPL once the BABA trades clear. We will be adding to the Apple position, and hedging with NQ futures overnight etc. and put options on the day. I suspect the DD here of 1.5% won’t breach 2% but as high as 3% would not surprise me. I am likely to add some type of weekly bull put spread on another stock on a weekly basis to level the playing field.

my favorite trade running into next week is a bear call spread on the 150 barrier 152/150 and bull put 146.5/144.5 - dont follow trades blindly, i have hedges on these too and they can be rough without them, ive decided to run the forums as a slight trading journal so my typing will be broken and quick / more often

The week has closed on a mild note for me. I am happy with the performance on my end, but disappointing volatility literally dropped into a new low. I was not expecting that. This removed the potential edge that was in store for the week. I was surprised, but again - how we are covered is better than unforseen risk. I do expect markets to make new highs next week, primarily the Nasdaq to catch up with the action we have seen across the S&P/DJIA… All of the programs are in great breathing room aside volatility. I will be initiating additional VXX short call spreads as I do have confidence we are unlikely to be retesting the 36 barrier next week. Those should pull down around $500-1000 in actual profit, not simply covering our decay on the long call. Additionally, I will still be looking to add to our long put positions. At this time, the program has incurred about 2-3% in hedging costs, which is absolutely normal. I would like to explain the program a bit more right now:

Here’s why there is so much upside. The program works like this:

We want to neutralize a long VIX position with the assumption that what happened on thursday morning (surprise market drop, and spike in volatility) sustains itself, however respects our barriers. This means the options expire worthless, and then I have the long calls and the long VXX position to leave open for a blockbuster trade. With volatility this low, that’s why we are trying this. It’s also a perfect hedge if you have a portfolio mostly long stocks. But it’s hard for me to really explain it further in words. At this point, however… I do believe now we will close out the month in negative territory on the program, likely roughly around 2-3%. Decay is contained, and I’m not worried about it - but am dissapointed that price action on Thursday did not provide the edge that I had hoped.

Enjoy your weekend.

@TradePRO I was simulating your strategies and now they are private and simulation shows -100% for all of them. What did happen?

1 Like

You had no intention of subscribing to the strategies. I found an enormous C2 glitch in calculating margin and while I figure out what’s happening I have gone private. The strategies are all in the money except for Volatility.

I lost money with the volatility strategy, unfortunately a semi-disaster today primarily to a C2 complication in calculating margin. I have read many reviews from people that want strategies which are spreading options, and today I found out why it’s possible C2 doesn’t have more people doing this. There is one person doing it by the name of Jennifer but she is playing many stocks at once, and one swan will wipe her out on those bear puts she plays. The best thing to do is stick the indices or volatility. There it’s possible, but there are limitations - which should be made more clear to trade leaders. There have been a few other errors, but not as bad as this one.

This week I had initiated a VXX spread primarily working around the 37 barrier, which we should see those short calls expire worthless. However, I needed to hedge moving into next week. so… I opened new VXX long calls expiring next week, and closed the current long calls I had in profit - the system should have still considered the short 37 VXX calls as covered. After I closed the long calls for a profit on the week, C2 initiated a margin call, basically considering all short exposure I had as uncovered, when it wasn’t. This resulted in me forcing to close all the positions, including the VXX short 37s for a loss on the week, where they are likely going to expire worthless for a profit. It’s not that complicated to work around this with Collective2 - you just have to make sure the trades are synthetically paired, and you can’t open up calendar spreads. However, if you don’t know that - then you will lose money. And I lost money on this error today, more than was comfortable for me, or the subscribers. However, NasdaqPRO and OptionsPRO are moving forward fine and I will make them open to the public again. Volatility was giving me trouble, which was expected, however this just made it unmanageable, and I apologize.

1 down. 3 to go. :face_with_raised_eyebrow: