Time to separate the men from the boys.

I was driving North to LA this morning when the markets opened and I missed one of the best trading opportunities ever.  I tried my best to make moves while driving via my mobile (yeah yeah not safe i know) but I just couldn’t get it done with limit orders since the swings were too fast to track.  I did get into some new positions but not at the levels I would have preferred, but still good I think.

I did start the day with the most random DOUBLE ever though.  On Thursday I shorted the VIX with 150 Sept $13 puts for .10 cents, and then I instantly entered a 60 day limit order with a sell at .20 cents.  I figured if someone offered me a double I’d take it.  Well for some random reason it filled?? 🙂 The VIX spiked to above 50 and my call that it falls below 13 doubled. um…. OK.

In the theme of shorting the VIX I also opened a $16 September put at .70 cents.  I’m going to give it a couple days before I enter a sell order.  VIX options are the most time sensitive play out there so until you get within literally a week of expiry you got room to move.  I’ve been pretty hit and miss playing the VIX but it is spiking to historic highs so as long as we get a little stability in the next couple weeks this should also be a nice double.  I really wish I had more time to study VIX strategies as I think there is a way to capture these moves… selling the calls and puts vs buying… if you sold a call put spread to take advantage of the significant time premium???

So the bottom line is my head is spinning with these market moves.  I love the action.  So why the sell off?? um no one has a good reason.  We don’t have a banking crisis, we don’t have a sub-prime crisis, we don’t have a recession, we don’t have a war, we don’t have any significant political crisis.  No Greece issues.  What we have is China and the fed. Ha.

Do you know what we have??? we have a Bull Market that ran too far with no correction.  Every technical trader out there, which is EVERY hedge fund btw has been building in a sell strategy for an inevitable “correction”.  So what happens when 70% of the market has computer programs set to execute a sell strategy when certain technical factors hit the system that indicate a correction is in motion….. well a negative feedback cycle kicks in.  As a physics kind of dude I love when the physical world collides with the financial, cool to watch.  The problem is its hard to break a negative feedback cycle…

So now what? I have no idea.  But lets looks at the basics:

China is black hole of reality.  Guess what…communism meets capitalism is messy.  very very messy.  For those that are unfamiliar, its usually capitalism vs socialism and communism vs democracy, China is doing a little Communism capitalism which = messy.  So messy we got.  BUT lets look at the basics, we have about 1.5 BILLION people who are looking to crack into the real world economy.  These are real people, 1.5 billion individuals, not statistics, real mothers and fathers fighting for a better life for their children.  So China is slowing in GROWTH… ok, not shrinking, just slowing.  got it.  Their stock market? a joke, fiction, communism fiction, once the market figures out the China stock market is NOT the China economy we will be ok.

The Fed.  The market really really needs the Fed to raise and then to indicate the slowest ramp up ever.  Every talking head idiot that says a raise of .25 points points matters is a moron.  The raise indicates that the economy is getting better, not worse.  Its not great, yes we all know that, but we are growing not shrinking. Bottom line.  Come on, interest rates for consumers may actually DROP if we raise to .25 and then commit to a long hold.  It will kick housing even higher and stop this market madness. I’m not sure the market can find a bottom till we get this.  The fed is very aware of the equities market, but they are NOT a slave to it.  These are very very smart people.  Have a little faith, not a lot, just a little.  (for those that want to debate monetary policy and the fed I’m up for it, Milton Friedman had it right in theory but we can’t get to free market, too many politics, so what we have is this mess)

So what am I doing?  I am staying with my strategy to give this market a little time, no more short term option strategies.  I am going out to January 2017 with all OIL plays and I’ve built a 6k position into USO $15 call Jan 2017.  I will continue to cost base down this position every $2 drop in WTI.  Oil is not viable for the world below $40.  So betting that it will bounce back in the next 15 months doesn’t feel that risky to me.  If we spike back to $60 at any point in the next year this will be a very nice return… (and don’t start with me on the etf contango issues, its just a price to pay, the leverage of options against the etf make it such a small issue its not worth discussing.)

As discussed I have the short on the Vix, September $16 Put.

I also started a position on SPY March 2016 $210 call (general market bet).  I didn’t get the bottom of today’s rout, but close enough to feel good.  I’ll give this one or two more rounds of cost basing down for every 2% the market moves down and then hold till December and then roll it out if we haven’t recovered by then.  I will not hold this past a 3 month expiry, I will roll before then if needed.

I also started a position in XLE January 2017 $70 call.  This is just an additional bet in oil, but with less of a dependence on the US dollar, which could affect WTI.  This is an ETF that tracks big Oil (Chevron, Exxon, Schlumberger, etc)

Fun times.

“Be fearful when others are greedy and greedy when others are fearful”

Lets get it on.