Trade Log – Week Ending Mar 21 2020

With all of the human tragedy happening around the world right now, these posts seem somewhat trivial. Before getting into the details of trading and my weekly rhythm; I’d like to start with a quick prayer

Heavenly Father, in these turbulent times we turn to you as our source of hope and strength. God we are thankful for your provision and your love. For your unending mercy and grace. We thank you for the gift of salvation that you have provided to us, and for accepting us in our brokenness every day. You’ve asked us to bring our burdens to you, and Father we do that today. Lord help us to turn our focus to you, and Father we ask to that settle our hearts and minds brining peace. Thank you Father for your love and provision. Amen

While I don’t talk about it much on this little blog, I’m a follower of Jesus and he is my hope and strength in these difficult times. The world is a crazy place and will likely continue to be that way until He returns. I’m super thankful that the God of the Universe has decided to offer us a hope for eternity.

This week was yet another hard down week in the markets. The fed acted multiple times and it’s just been crazy! This week I also spent the entire week working from home using video conferences as my primary method of working. It was exhausting given the amount of change that is to my normal rhythm.

For the week, I didn’t trade a ton, but I did do a few things. I had a bunch of March expiration positions that closed out across most of the equity names I have in. Some I simply let expire, and a few I closed to limit risk in the unlikely event of an upturn.

My positioning is still firmly bearish, and I’m short /ES over this weekend.

Having close access to my trading platform during the week was weird for me. I opened a bunch of short /ES positions in the overnight or early am sessions that I closed early for losses this week. It was good to have quick access to glance at market activity. It seems my loss aversion, given all the uncertainties around us, has gone up a lot. That’s a shame, because the initial decision to get short was right each time. I exited early for losses that didn’t need to be realized. This was a good (although expensive session) this week and I will have to adjust accordingly as the weeks go on. I expect to be working from home for the foreseeable future and there will be ample opportunities in the coming weeks that require patience to let them play out in these exceedingly high volatility markets.

With the March cycle closing on Friday my portfolio is down to only a few symbols:

/ES – Short

EEM – Iron Condors, all breached in the April Cycle. These will likely need to be closed in the next few weeks.

FXI – Very wide Iron Condor, March 27 Expiration – currently near the put strikes. China appears to be recovering from the initial impacts of Coronavirus. If they can hold that for the next week I should be able to close this for a small profit.

IWM – Short Call Spread March 27; this should be a max winner. I’ve got a GTC in to close it for $0.02.

MNK – Long stock. It’s a small position, hopefully it plays out nicely this week otherwise I’ll cut it. I’ve got GTC’s in for my targets if it happens to bounce.

OIH – Short Put Spread 5/4, April Expiry. This one is going to be a lotto ticket. If I end up long OIH at 5, I’ll likely take the shares. Over the longer term, OIH should come back up above 5 and I’ll sell covered calls over this if needed.

OPK – Long stock. Again, a small position and I’m holding it for Coronavirus news. I’ve got GTC’s in for my targets if it happens to bounce.

SPY – I’m all wrapped around SPY, net VERY short. This is driving almost all of my portfolio delta right now. I’ve got a lot of put debit spreads, some for next week and some for April. If we get a strong bounce on fiscal stimulus news, I’ll send a bunch of call spreads as well.

VXX – I’m still short vol on VXX. This credit spread is a 37/40 so it’s way in the money. This isn’t a max loser yet, and I’ll plan to hold onto it on the chance that vol settles over the next 4 weeks or so. I will consider get into more VXX short positions this coming week.

Anyhow. I’m burned out from the week, so that’s all I’ve got for now. Stay safe, physically and financially!

Locked, limit down – March 16 2020

The market’s moved to limit down late last night, this morning when they opened up we immediately hit the circuit breakers for the 15 minute trading halt.

I believe we have a reasonable chance to end up with a trading halt today given the degree of uncertainly in the market place. That would be a 20% drop in the overall markets. Given the massive ramp up Friday, that would simply require the markets to give back Friday, and have another Wednesday or Thursday from last week.

I am certainly not hoping for such a drop; however uncertainty has hit a peak and with that markets will respond with flight and fear.

At a minimum, I expect markets to close >10% down today (absent a fiscal package) from the Friday highs.

The organizations that I am engaged with in a leadership capacity are all shuttering non-essential services and finding alternative ways of working. We see similar things happening across the world; and until that all shakes out and we understand what the future may look like, I expect markets will simply continue to drop lower.

My current expectation is that we will see 1800/1750 on the SPX sooner rather than later.

Fed meeting moved up – rates dropped 100bps – March 15 2020

This evening, the Federal Reserve dropped the discount rate to 0%-.25%. The FOMC met this weekend and have cancelled the planned meeting later this week.

I’m not extremely surprised; however it’s not going to fix the underlying problem.

As I type this, the futures markets are limit down effectively across the board. With an almost 10% up day on Friday, I expect we will see the next leg down starting tomorrow.

Fiscal stimulus is certainly on deck soon, however I’m not sure it will do much to mitigate the downward pressures that we are experiencing due to the Coronavirus. Once a fiscal package is passed, I expect it will provide a near term rip higher, but that’ll be short lived.

As of right now, the FOMC is holding pat on not going to negative rates. The Fed is very likely going to expand QE is a material way, this is just the first step.

Fox Business asked a great question that the Fed chair dodged expertly on the call regarding buying “other assets” simply stating that they do not yet have the legal authority, and are not asking for it yet.

Trade Log – Week Ending Mar 14 2020

First off, my heart goes out to the millions of people around the world who are impacted by COVID-19 and the health, social and economic impacts it has created. My family is impacted, however not anywhere near as much as those in China, Europe and other parts of the world. We will continue to pray for all impacted as we collectively work through this challenging time.

On March 1st I wrote:

Last week marked one of the most aggressive, and orderly sell off’s that we have ever seen in the markets. It was however not a crash.

What you just witnessed on during the week of March 8-14 2020 was indeed a crash. The global markets are panicking and have no idea what the future brings. I’m not sure this is the only one we are going to see in this cycle – so keep alert!

/ES 1 year

Treasury marketings are starting to show extreme signs of stress leading the Federal Reserve to unleash 1.5 trillion in capital to aid the smooth flow of bond markets. (wsj: Fed to Inject $1.5 Trillion in Bid to Prevent ‘Unusual Disruptions’ in Markets) Fiscal stimulus is on the way (almost certainly) over the next week and the fed will very likely cut the benchmark overnight rate by another 50 bps during its upcoming meeting.

As for my trading, this week wasn’t extremely active however I did make some adjustments and moves. The SPY puts I bought last week played out very nicely and 1/2 were sold for a about 115% on Monday while the remaining 1/2 was sold on Thursday for 700% via GTC orders – that was shocking too me. Those puts have broadly offset the losses that I experienced at the beginning of this down move by expecting chop way too early.

On Wednesday night, when the NBA cancelled the season I also jumped into a bunch of /ES shorts that played out very nicely. Unfortunately, I bought those back a little early and then decided to continue to play downward momentum over Thursday night. The gains from Wednesday were wiped out during the limit up move.

As of this moment, by speculative portfolio is basically neutral. I have two long stock positions is OPK and AGRX that I am looking for upward momentum in; I will likely cut those loose this week if they don’t start to move in my favor.

On Friday I sold a host of bear call spreads on DIS, IWM, AAPL, DIA, CCL and a few others.

My only short vol position (which is getting creamed) is VXX April 37/40 Calls, with the VXX at 43 this one is looking pretty nasty right now. With what we are learning about the virus and the impact is it having in other nations, I’m not confident this VXX position is going to turn around.

I’m also in a TLT position that has gotten a little better after TLT came in hard last week. It’s still completely breached and if an opportunity presents itself on Monday to get out – I’ll be doing that. I expect bonds to continue to rally over the next couple of months as our economy is continued to be stressed.

SPX selling was solid this week; although I didn’t do it every day. Given some obligations both personally and professionally I was not comfortable with entering positions on Monday or Friday. I did enter on Wednesday and it was 100% profitable. Backtesting shows that I would have had profitable trades on Monday and Friday as well. I’ve adjusted my risk management strategies for this market which include being very careful on the call side of the short dated options. Pullbacks are much more vicious than selloffs in this type of an environment – they also happen at a time that my strategy is very vulnerable too.

This weekend I’ll be putting together my game plan for the next few weeks. My belief is that things are going to get a lot more challenging before they turn around. There will be some particular names that should do very well in this challenged environment, however there will unfortunately be many that will be very very impacted.

Rally’s will continue to be strong – however I believe they will be short lived.

I sold most of my “doomsday” hedges too early into this cycle, so I plan to assess other ways to adjust for severe economic contraction.

At some point, hopefully much sooner rather than later, there will be a tremendous opportunity to invest into strong companies and growing economies as our world recovers from the impact of this current time.

Limit down – March 8

Monday looks like it’s going to be quite the ride. As I type this late Sunday evening, the /ES dropped like a rock and is basically pinned to limit down; treasuries have fallen to sub .5% on the 10 year, the 30 year is below 1% and oil has cracked $30…

Absent some sort of intervention, we are experiencing a real crisis and may see a true crash tomorrow and into this week.

Circuit breakers:

Assuming the Fed doesn’t jump in tonight, I wouldn’t be shocked to see a Level 1 halt, possibly even a level 2 halt tomorrow. For those of you that aren’t aware of these basically they work as follows:

Level 1 – At a 7% down move, trading stops for 15 minutes (if it happens before 3:25 PM EST)

Level 2 – At a 13% down move, trading stops for another 15 minutes (if it happens before 3:25)

Level 3 – At a 20% down move, trading is halted for the rest of the day.

If you want more info: CME Group has futures info here, CNBC did a piece a few years back here and of course the SEC has the final word here.

Given the recent intraday price movements we’ve seen, and that /ES futures are locked limit down at 5% on the Globex session, another 2% at the open seems very possible.

The speed and size of these moves over the past week have likely resulted in liquidations and a few firms “blowing up” as they cannot cover margin requirements due to vol expansion, gamma risk and all of the related problems that come with these massive moves. With /CL, /ZN, /VX and /ES doing what they are doing tonight – more liquidations tomorrow seems very possible – and that means more downside pressure.

Be safe and manage your risk sizing!!! As I write this:

Quotes - limit down.

It’s not looking good for tomorrow’s opening, or likely the next couple of weeks…

Trade Log – Week Ending Mar 7 2020

This post is a little late – it’s been a busy week and weekend!

Last week was just downright crazy in the markets. It seems like the week took a month or two to finish given how big the moves are and how crazy the trading has been.

SPX Daily chart

On Tuesday the Fed cut rates by 50 bps; which was either a brilliant move or, more likely, a massive warning sign that things are going to get much worse before they get better. My guess is they do another 50 bps this month; I’m not sure they will wait until the meeting on the 18th, but that is where I would be placing odds.

Over the past 7 days, I’ve done a tremendous amount of position adjustment and changes to my risk profile again. The travel industry is continuing to get hammered (it doesn’t look like it’ll stop anytime soon) as major corporations start to cancel conferences and implement restrictions. The put spreads I had against these names were all too close to handle that kind of demand destruction, so I’ve mostly closed them down. Those companies are typically highly leveraged and operate on relatively thin margins when things are going well, so there will likely be continued selling pressure across those names. I will consider opening calls spreads with a shorter term bias on those names as time goes on.

This week, my focus was on a lot of COVID-19 short term plays; typically in the medical sector for those that are working on treatments, testing or the like. These names are showing tremendous volatility and opportunity for short term speculation.

I remain short vol via VXX and UVXY however those positions are starting to look less favorable as the weeks grind on. My UVXY positions are out in April so they have a decent chance of coming back in, however the VXX expire March 20th and are well under the current VIX readings. Given the likely timing of the spread of this virus (weeks and months vs. days), my expectation is that the VXX positions are going to be just too early for vol to come back in. Time will tell.

To manage against the tremendous amount of movement in SPY and the continued expansion of volatility, I’ve flipped to be more of a purchaser of SPY vs. a seller of it for now. I’ll evaluate this stance weekly for the next few weeks and eventually swing back the other way to sell premium. For right now, the moves are simply too large and vol expansion is simply too big to see these positions make money in the short term.

Typically I have longer term spreads on that are simply playing for theta decay and moves insight implied vol. I still have a bunch of April call spreads on across DIA, XRT, XHB etc… however, I haven’t done the put side of these and don’t plan on it to keep a bearish tilt in the portfolio from a selling perspective. I did round off my IWM and EEM positions to be neutral.

Quick portfolio review:




I’ve been using SPY as a scalping vehicle and currently have a slightly long delta position due to the current market movement – dynamic delta has been very dynamic recently. I’m long both puts and calls to scalp volatility spikes as well as have a normal neutral VERY WIDE iron condor for April that I’ve legged into.

Next week – I really have no idea where the market goes. Given the recent events in Italy and across the US; I expect that we’ll open the weekend with futures down and have more selling pressure. The market’s don’t look healthy with liquidity all but gone and I expect to continue to see massive moves in the major indexes for the next week(s).

My personal opinion here is once we get some degree of understanding of the true risk of COVID-19; the markets will adjust accordingly. For right now, it’s a massive cone of uncertainty with more downside risk than upside in my view.

My SPX selling strategy had its first full loss this week. On Wednesday, my short call spreads where at 3125/3130. These where sold when the market was already up 40 or so points, and had about 90 points of head space above them.

As you can see from the charts below – SPX ramped just over my top strike into the close running about 20 points higher in 10 minutes or so.

SPX - 5 Min Chart. Ramped to the close

Then immediately after the close, simply dropped back down 20 points so so.

/ES five min chart, dropping immediately after the close.

There isn’t much one can do with a situation like that. However, it is interesting to see how the backtesting played out perfectly on this one. My testing had shown that the biggest risk to these positions is on massive up moves.

The good news is that even with the loser on this trade, I’m still up on a unit basis for the year. Overall down due to scaling, but that’s okay. I’ll keep testing and if this strategy can survive a market like this – well good grief it should be able to survive anything!

2 Days. That’s how long it takes for the Fed to step in.

Today the Federal Reserve cut the benchmark rate 50bps in a “surprise” move. After a G7 summit this morning, nothing was announced. Then at 10:00 EST they did a random press release to say that the rate will change; weird at best. The effect was very brief – generally speaking the markets hated it.

SPX 5 min Chart

On Sunday I wrote a piece about how I expected the Fed to cut rates this week, and they delivered. My forecast of the reaction was quite incorrect for the timing, and as a result my plans to trade it are a bit off kilter and I’m adjusting accordingly.

Yesterday, after the nice bounce in the major indexes, I sold a few near the money call verticals on the SPY. These were quickly closed after the Fed announcement (for a loss) as I expected the market to rally hard and hold for a day or two. Unfortunately that forecast was way off and today turned out to be another 50+ down move in the S&P’s which is driving my slightly positive skewed portfolio into some serious red territory.

Those SPY short call verticals would have been very nice given the sell off today. I checked the pricing right around market close (because everyone likes to understand what they missed out on) and I had roughly 50% gains in the bag (woulda, coulda, shoulda – didn’t).

At this point, it’s time to trim positions that have little to no hope of recovering given my current market forecast. I’m rotating through some positions and realized losses on UVXY spreads that are unlikely to come in over the next week, also closed out some deeply breached ITM put spreads. With vol continuing to expand, /VX continuing to rise, the market totally shrugging off a Fed rate cut and COVID-19 cases growing exponentially I just don’t see a near term bullish case that makes sense.

The rotation of new positions are mostly bearish in tilt. I’m picking a few equities, but going more towards 16 delta calls on indexes to give plenty of room for volatility and allowing things to get deeply out of the money for quicker profit taking on drops. I’m holding some longer term short vol positions for a bit; we’ll see how those play out.

We may get a few relief bounces in the next few days as we grind lower – however I’m not interesting in letting my existing ITM put spreads go any deeper ITM given the short amount of time that is left on them. I’ll take the residual value and use it for some profitable trades instead 🙂

Coming back to the rate cut for a bit. The cut today puts the fed in a really awful scenario at their March policy meeting. They cut, and it didn’t do anything in terms of helping the market. The market is basically demanding another cut with the price action and the fed is almost obligated to do another 25 bps (minimum) at the March meeting. It doesn’t really do anything to help the actual problem, it is largely symbolic at this point. Possibly buffering potential demand shocks as a bit of early insurance against them – but that remains to be seen.

In 2008 credit conditions were actually messed up. We had real financial problems in the economy and monetary policy was an appropriate tool to aid in addressing the problems. Given a growing potential global pandemic, rate cuts don’t do much if anything to offset supply shocks. Possibly expanding the balance sheet, offering lending facilities directly to firms and other market operations have some impact; but lowering the funds rate, I just don’t see that being meaningful. Most of their tools address the demand side of the equation.

Furthermore, the Fed just shot their bullet. They really only have a few of them before we hit the zero bound on the funds rate – and unless the US is prepared for negative rates, it’s time to start getting creative with monetary policy.

Maybe this is a play to say to the policy makers – we did our part, now you do yours. I wouldn’t be surprised to see stimulus packages come to play later in the year as we continue to experience economic drag due to COVID-19.

Stay safe out there and keep your risk in check! The markets are whipping all over the place and you can lose your shirt in a heartbeat if you don’t manage your risk appropriately!

How long does it take the Fed to step in?

Last week marked one of the most aggressive, and orderly sell off’s that we have ever seen in the markets. It was however not a crash.

Market’s do crash, and when they do it is disorderly and pricing moves are vicious. Friday was the closest thing we saw to a crash, however the buyers stepped in (my guess is to cover their short positions) over and over throughout the day. If we drop more than 5% in a day we are in a real true crash type of situation – we have seen an orderly repricing of risk.

However, liquidity appears to be drying up, and the market for all intents and purposes appears to be ready to simply puke on itself sometime in the next few weeks. Futures this weekend opened with the /ES down another 30ish points; I wouldn’t be surprised to see that continue to have downside pressure unless something changes overnight – possibly bringing another 100 point down day in the SPX.

News of the COVID-19 spread is all negative. The United States experienced the first death directly related to COVID-19 and there appears to be a cluster of new cases forming on the east coast. Given that information, along with the news that the Washington cases could have been spreading for weeks it is a virtual certainty that we will have a massive spread of COVID-19 across the US at this point.

If the future response to the spread in the US looks anything like it has in other countries, we are in for severe demand shocks and quarterly earnings are going to tank for many, many firms. The market understands this, and appears to be absorbing this possibility; if it begins to materialize… look out below.

Markets are pricing almost 4 rates cuts in at this point – and honestly, I was a bit surprised that the Fed didn’t step in before the futures opened this weekend. While central banks can’t cure a virus, they can inject liquidity, lower rates and show accommodative policy to ease financial frictions.

The CME has a nice little tool called FedWatch – it’s pricing a 100% change of a cut at the next meeting…

CME FedWatch Prediction

My guess, in the next seven days – central banks across the global begin a coordinated effort to “ease” financial conditions. That leads to a wicked near term jump in the markets and a tremendous selling opportunity.

I’m planning to continue to remain nimble and trade the tape as it develops.

Trade Log – Week Ending Feb 29 2020

This past week we witnessed the most significant market selloff since 2008. The major indexes are all down more than 10% – straight down more than 10%. Vol was “bid” all week and we just barely got into oversold territory by the end of the week. The charts below show just how dramatic the move was, and the extreme vol spike that followed.

SPX 1 Year Chart

It was a weird week. The selling was fast, and consistent and unexpectedly directional. By that, I mean that typically when we see these types of events they whip around a bit, this was just a rapid orderly down move. Honestly, I’m still a bit shocked. The hourly chart below shows how it just drove down, basically straight down. The overnight session had massive moves this week as well, with some very choppy tape.

SPX 1 Hour Chart

For me, it was really a tale of two tapes. I’ve made no secret of my expectation that the markets are coming down. I’ve been short and loading up on shorts and Monday was a great day for me. However, I exited my positions very early in the week and started to load up on short vol and long delta.

I really started to load up on Wednesday when the market appeared (for a brief moment) that it was poised to bounce a bit. This was a doubling down on short vol, and then getting long a tremendous amount of delta via /ES futures. You can see what appears to be a nice bottoming over night with some a nice push higher and a push higher on volume at the open Wednesday. I read this as the market being poised for a brief recovery…

Early week /ES Chart

Those two positions, short vol and long delta worked against me in a material way this week and by the end of the week I had blown through all of the weekend profits and realized some pretty sizable losses due to the amount of long static delta (ie: futures) I was holding. Looking at the chart below, you can see the brief recovery on Wednesday, and then the intensity of selling that followed the close.

Weekly 30min chart of /ES

Note: None of the losses I incurred this week are insurmountable or something that I am not prepared to incur. You must always manage your risk and relative position size. My losses relative to my portfolio risk profile are less than the market movement, however my expectation was to out perform dramatically given the action of the market this week.

I’m pretty disappointed in my performance this week; but am happy that I hedged my longer term investment accounts into a very conservative position before this drop began. Overall, it’s a win for the good kids (as they say on tastytrade) but it wasn’t a win for my speculative accounts – bummer.

I have a handful of positions that simply got crushed this week. Most of my put spreads have been breached on both strikes and I’ve been defensively selling call spreads to offset the exposure or rolling out in duration where possible to allow the market to take a breather and allow theta to work its magic.

My short term perspective on this market remains bearish. I’m still shocked that we haven’t seen a fierce up day given the massive downside movement; however I’m not interested in trying to speculate on that during this type of price action any longer.

It’s tough to be a trader when you have a full time job, and that really hurt me this week as I have to have a set it and forget it attitude for a large portion of the trading day.

Intermediate term, I expect we’ll be in a depressed earning cycle for the next couple of quarters (even if the COVID-19 outbreak doesn’t become a true pandemic like Spanish Flu or something similar). The panic and physical changes that we are making in relation to that panic: shutting down factories, stopping travel etc… are going to put a real damper on demand and supply. For those of you with an economics background, you understand how bad of a combo that is.

There may be real structural losses that will take years to recover depending on the severity of the demand/supply shocks.

The human toll of this virus is tragic, and my heart goes out to all of those affected.

In terms of a market outlook, I wouldn’t be surprised to see an additional grind downwards into a technical bear market. Given that I have an economics degree I’ll hedge that off and add the flip side that I also wouldn’t be surprised to see the market continue rally from this point and recoup a large degree of the losses. 🙂

As for current positions, here is what I’m dealing with right now:

AAL – Short 2 Different Put Spreads March 6th 18/17 and March 19/18

AAL Chart

I mean, it’s certainly possible that American Airlines can go lower; but it has basically been destroyed with the recent sell off. I will very likely keep selling these types of positions on travel related stocks with short term duration for a while.

This trade has moved against me – because I put it on on Wednesday…. I could have sold it for 2x what I did then. Oh well 🙂

AAPL – Short March 310/305 Put Spread and April 290/285 Put Spread

AAPL Chart

Apple completely fell out of bed this week. The hourly chart shows clearly how bad this performed during the sell off. I’m encouraged by the tape on Friday, and am really looking to see it move up over the next couple of weeks. The April position is one that I rolled out for a debit on Friday to get some more time. I’m hoping to roll the March position next week on a strong bounce from Apple – otherwise I’ll need to play some different defense.

This week I also sold a 305/310 call spread that expired Friday. Depending on the market action over the next week or so, I’ll continue to sell those shorter term spreads to capture some credits against these breached puts. On these defined risk type positions, I use that offsetting shorter duration spread as a tool to do something similar to going inverted on a strangle. It’s definitely not the same as inversion, and does create some different risks that need to be managed.

ADBE – Short March 365/360 Put Spread

I’ll look to try and roll this out also if the market starts to come back up soon. I was able to sell a call spread this week similar to what I did with Apple to soften the blow on this one. I got about 1/3 the width of the strikes on the initial sale and have increased my total credit to 1/2 of the strikes so far. I’ll keep whittling down the cost basis to hopefully get this one down to a minimal loss if the market doesn’t rally over the next couple of weeks.

AMBA – Long Calls; Various

Ambarella has earnings coming up and I’m hoping for a nice solid gain here. This is a lotto ticket type of play. Right now it’s looking good.

AMZN – Short April 1930/1920 Put Spread

AMZN Chart

So Amazon just blew the doors off of their earnings and shot up like a rocket ship – then this week started 🙂

This spread started off as the March position from last week, I rolled it out and wider into April. I’m expecting that Amazon will benefit from any COVID-19 risks that are out there as more people will just want to order online and get stuff delivered. I’m basically in this position for about a $5 credit at this point, so I’ll work to spread off the risk once I see market action in Amazon next week.

I’d love to put some calls on above this, but will need some strong upside movement to make that a reality.

CCL – Short March 29/27.5 Put Spread

It’s a cruise line. The stock has been murdered – so much so that it started to recover on Thursday this week 🙂 I’ll keep doing these until I can’t.

CMG – Short March 950/960 Call Spread

This one is kinda of frustrating to me. CMG has fallen to 773 with the sell off. This spread is so far out of the money at this point that I can’t even buy it back! I’ve tried a bunch of different strategies to pull it in to free up some capital but nothing seems to be working. It’s not a huge position, but it’s holding some cash that I’d prefer to release.

I’ll likely go ahead and sell some put spreads underneath it this coming week given that it appears for now that CMG has found some footing.

DIS – Short March 6 131/133 Call Spread, March 135/130 Put Spread

This one took a double whammy. With the market drop and abrupt change in leadership, this guy is in trouble. I’m breached and I don’t know if there is any real chance to get this back into manageable ranges.

I’ll keep selling the shorter duration call spreads to try and capture some gains and may end up rolling this out or just closing it down. Disney still seems like a great longer term option, however near term with the parks and everything else, it’s not looking good.

EEM – Short April 40/45 39/33 Iron Condor and 43/41 Put Spread

The Iron Condor on EEM is a new position. Just a normal premium selling type of move. The Put Spread was rolled out for a nickel debit into April. Given the massive moves in the market, I figured it was worth paying a small price to get some more time at approx 21 DTE on this guy. Next week may have been better to move it out, but it felt good to manage positions Friday given the capitulation losses I took 🙂

FDX – Short March 160/165 Call Spread

Woot! This one has come back in and it now profitable. The sell-off this week pulled FedEx right back into its range. I’m going to hold onto this one for a while and watch it decay in value before making a decision on profit target. Right now, I’ve got an order in to buy it back for $0.20 if it gets that cheap.

GSK – Long March 44 Calls

These are likely not going to play out. I’m down about 67% right now on the purchase price. If GSK can rally back next week, then I’ll hold them; otherwise it’ll be time to dump these. They are really going to start getting theta decay quickly now.

INTC – Short March 62.5/60 Put Spread

Another breached spread that I wasn’t able to roll out of. This one is sitting very close to max loss right now so I’ll be using the same strategies to offset the position with Calls where possible.

IWM – Short April 125/120 Put Spread

This is is a 16 delta Put Spread. I only got $0.62 for it however I wanted to start nibbling on new positions that are offensive vs. just defense.

I’ll freely admit that doing a 30 delta is just a little too close for me given the recent tape action and my near term bias. On a sharp rally or two, I’ll likely during this into an Iron Condor with 16 delta calls. If the 16 deltas get to around 170 or so I’ll start selling the other side.

MSFT – Short March 180/175 Put Spread

Microsoft had a strong up move today so maybe it’s possible this guy comes back – however that’s unlikely. I’ll be selling calls against this position for the next few weeks if the tape looks promising.

SPX – Nothing, everything expired 100% profitable

This was my best trade for the week! Another 3 for 3 stellar SPX selling test. I laughed on Friday morning when I sold 2725/2720 put spreads for a decent credit with 0 days till expiration. I’ll freely admit that I was worried about selling anything and went insanely low, but good grief – that would have been a 250 point down day in the S&P 500.

I’ll take the profits and smile. This is still a really small trade, but it’s proving nicely reliable and profitable. I’ll keep scaling it up throughout the year where it will hopefully begin to become meaningful in size.

I’m taking the scale yourself approach with it given how risky this stand in front of a train type of trade can be. Meaning that I am only scaling this with the profits it creates.

SPY – Short March 314/312 Put Spread and April 245/240 Put Spread

Welp. I bought back all of my puts on Monday and decided that we had a nice little drop on our hands that could be quickly profited from. So I sold some puts underneath it (why not calls above it, why not calls!!!!!) – ouch.

The March position is totally busted and I’m not sure it’ll come back. I’ll look to roll it if it make sense, or just keep selling things around it. I’m hesitant to sell calls right now until the market gets a bit of a relief rally. Although Tuesday, Wednesday, Thursday and Friday would have all been good times to do that.

TLT – March Iron Condor (Calls Rolled to April) 148/151 142/139

I rolled the calls in this one to April to avoid assignment of the fairly deep in the money calls. It wasn’t cheap, but it was better than taking an almost full loser this early in the game.

Bonds are up, and headed higher. I don’t really think this is going to come back in so I’ll be selling different positions through the month. Worst case, I’ll have cost myself an extra $0.20 for some peace of mind and avoided dividend risk (which was more than $0.20).

UAL – March 60/55 Put Spread

I sold this guy on Thursday. It looked a lot better on Thursday. This may be a problematic spread over the next couple of weeks, so I’ll need to figure it out as the market plays out.

UVXY – Short March 13 15/19 Call Spread and April 17 26/29 Call Spread

Well, this kind of turned into a mess. I started shorting vol early in the week with a 15/17 call spread. That was way too early, so I spread it off again at 17/19 mid-week resulting in the current 15/19. On Friday I put in the 26/29 which is likely the best position 🙂

My 15/19 is going to look really odd as I mange it through the next couple of weeks. Because the original 17’s were basically sold back for a sizable credit on the 2nd spread, the position is now a short debit spread when I look at my P/L. In reality, there is still plenty of credit that I received for doing both of these, however given that the 17’s are flat, the credit is already realized.

I’ll keep doing these if I can over the next couple of weeks as vol comes in. The March 13th spreads may be in trouble if things don’t settle down reasonably soon. I’m find exiting that for a scratch play if needed.

V – Short March 205/200 Put Spread

V had a nice rally today, and hopefully it’ll start to come back a bit. I’ll keep an eye on this and defend as much as I can.

VXX – Short March 17/19 Call Spread

Another early entry. Assuming things settle this should be find. I wish I had done April though 🙂

WYNN – Short 100/97.5 Put Spread

Another new position on a beaten down name. This on is not breached yet and is basically the current 30 delta Put Spread. I’m honestly don’t remember why I decided to make it so tight on the strikes.

YETI – Short March 6th 30/29 Put Spread

Yeti came back above my short strike today which is great. I’d really like to see Yeti hold this into next week so I can get out of this guy for a nice profit.

Let’s talk about Budgets

Unless you’ve been hiding under a rock for last the last few weeks, you’ve heard all about the panic that is the Coronavirus a.k.a. COVID-19. It’s possibly a really scary economic reality that will hit the global system over the next few quarters, and you should begin to prepare yourself and your family. I’m not a doctor, or virus expert – so I’ll leave those things to the professionals; I am however quite proficient at budgeting and believe firmly that having a strong budget in times of crisis is critical.

Budgeting is actually really simple to do. It’s scary for those that haven’t done it before, and can feel stifling if you don’t wrap your mind around the reality that having control and oversight of your finances gives you a ton of freedom!

At its core, a budget is a simple plan that is created to direct spending and provide visibility to areas of spending. Budgets are one of the most effective and simplest ways to manage your money, build wealth and create freedom.

You don’t need to make six figures or have millions in the bank to have a budget. In fact, if you find yourself living paycheck to paycheck – it’s critical that you get a budget in place immediately. Without a budget, your ability to get away from living paycheck to paycheck and moving toward financial independence is critically hampered.

You can make a budget on a napkin, in a journal, using a spreadsheet or with any number of fancy pieces of software. I’ve made no secret of my support for You Need a Budget, and would strongly suggest you check it out if you’re interested in the software route.

If you are ready to start…

The first thing you need to do is get an understanding of what you actually have.

I’m a fan of budgeting cash in your possession, not what you think may show up in the future. I’ve been burned enough times in my life with poor forecasting to realize that cash in hand budgets are way more effective than ones that anticipate a reality that may not materialize.

Please note, I’m not suggesting here that you avoid longer term financial planning and the like; I just view that type of work as very different that your daily operational personal budget.

To get started here, it’s pretty simple. Open up your wallet, your bank register(s) and your savings account(s) – add up the money and write it down.

Let’s pretend that you have the following situation:

  • Wallet: $150
  • Online Checking: $300
  • Online Savings: $250
  • Other Savings: $500

If you add all of those accounts up, you’ll find that you have $1,200 in cash. That’s a great thing to know and to have as you look at the next piece.

Once you understand what you have, you need to understand what you expect you’ll need and start to allocate what you have. I’ve found the simplest way to do this is to look through your bank and or credit card statements to see what you spend. If you spend a lot of cash, it’ll be tougher to be exact and you’ll have to guess a bit.

You can think of your historical spending as a “goal” of funding for each month. You may want to try and lower the spending, or increase it – regardless having a target is crazy important!

For sake of this example, let’s assume the following:

  • Rent: $900/mo (already paid this month)
  • Food: $400/mo (already spent $300 this month)
  • Clothing: $100/mo
  • Transportation: $300/mo (already spent $250)
  • Other expenses: $300/mo
  • Credit card payment: $75/mo (Balance: $2,000 – vacation was great…)

Given that you’ve already paid a bunch of your expected monthly expenses, your first task is now to allocate that $1,200 of cash and give it a job! Personally, I like to have jobs that are not just to cover my expenses, but also for important things like emergency funds etc…

Okay – so let’s get the first “budget” up and running for the remainder of the month:

  • Emergency Fund: $500
  • Food: $100
  • Clothing: $100
  • Transportation: $50
  • Other expenses: $300
  • Credit card payment: $75

At this point, you’ve budgeted $1,125 of the $1,200 in cash that you have! That remaining $75 should get a job right away, and if this was my personal situation, I’d put it immediately toward next months rent chipping away at the upcoming payment of $900.

  • Next month Rent: $75

Boom – now you’ve budgeted all of the cash that you have and can start to get a feel for what you need in the next month. You know right away that you need another $825 to pay the rent, and then can start to fill up other categories right away as you get your next paycheck.

Here is a quick snapshot of what this might look like in a spreadsheet:

Sample of what a budget may look like

You can get way more complicated for sure but this is a simple way to start! You can start to track your spending in your spreadsheet and do a little math to see what is left as the month goes on.

Eventually, this gets pretty complicated in Excel – so again I’ll plug YNAB 🙂

Putting it in practice

With your newly minted budget – it’s time to use it! If your buddies give you a call and suggest a road trip for the weekend, including hotel and an expensive micro-brew round up…. you get to make an informed choice.

You can quickly look to your budget and ask: Do I have enough cash today to enjoy this trip? If you have the cash, and it’s in the right categories – then have a great weekend! If you find that you have the cash, but you’ll need to raid another category, you know can make an educated decision on what is more important to you – and you can start to get control of your spending very quickly.

Why does it matter?

For me personally, I’ve found that without a plan – money tends to disappear. It gets spent on frivolous things, and that can create situations where important things get put at risk.

Given some of the uncertainty facing our economy for the next few quarters, now is a great time to get a bit of control and start to make informed choices in how you spend you money!