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.