Thursday, December 26, 2019

The Pozsar Prophecy did not come to pass

Our Dec. 10 post citing a prediction by a market pundit from the ZeroHedge site....

  • "It's About To Get Very Bad" - Repo Market Legend Predicts Market Crash In Days .....

.....and ensuing market chaos in the days surrounding Christmas did not come to pass.  Perhaps too many were expecting it.  Perhaps the Fed is stronger than market forces left alone, once more.  Meanwhile, the Fed shovels dollars into the market to keep things afloat.

Instead, as we advance into the new year 2020, the new decade, we read predictions that the SP500 will continue its march, and not rest until 4000.  Will this prediction come true? We suspect this is the real "Fed policy."

Will the Fed remain in control of market forces .... forever?

Monday, December 2, 2019

250 trillion and memories of Columbia House

These interesting words today from Tom Sosnoff, Options Guru, founder of TastyTrade:

Monday, December 2, 2019
I hope everyone had a great holiday weekend.

I hope everyone had a great holiday weekend. Now it’s back to business. One of my original Columbia House picks when I was 12 years old was a Sly and the Family Stone album called Stand. It included many hits but one of the tracks that I still love today is ‘I Want to Take You Higher.’ Little did I realize that some 50 years later that tune would be the unintentional theme song of the Fed. I think I just saw Jerome Powell’s eyes roll back in his head. Still, like every other kid in 1969, my biggest financial worry was figuring out how I was going to get out of my newfound debt and retrieve my soul from Columbia House Records. I think every record playing kid in America owed between $199 and $299 to this company and getting the money to pay back the debt wasn’t easy. Most of us just closed our eyes, ignored the notices and moved on with our lives (Hey, don’t judge. We were 12!). It took about a decade or so but eventually the company folded and its assets were acquired. I guess we skated but common sense suggested there was no way for the model to succeed. Free records are like free money, nobody ever intends to pay it back. So, let’s fast forward 50 years to 2019. Like many tastytraders, my biggest market concern is that somehow, someway, somebody is going to eventually have to pay it forward for all the free money being used to take the markets higher. There is now something like $250 trillion (yes, that number is correct, $250 trillion!) in global debt which equates to somewhere between $30K and $40K per every person in the world. Trump is 73, Putin is 67, Powell is 66, Xi is 66. It looks like today’s debts are going to be someone else’s problem. To put $250T in perspective, the total approximate GDP of China, Russia and the US combined is only $35 Trillion. You have to believe Powell and others at the Fed were part of that small percentage of kids who didn’t order 12 albums for $.01. They were way too smart to fall for that free money stuff….

Saturday, November 2, 2019

2655/2660/3070/3075 Iron Condor Follow Up

Re Dan Sheridan Iron Condor described below.  We said we'd follow up on this trade, and apologies for being tardy.

Results:Sept 27 close:  2,961.79.  If held to expiration, winner.  Here is Sheridan's original blog post.

"Yesterday during a webinar with Ally Invest, I put on an Iron Condor in Sep 27 expiration, 46 days out and with 5 wide credit spreads. Sold 3070 Call and Bought 3075 Call. Sold 2660 Put and Bought 2655 Put. Total Credit $1, and Risk $400. Looking for 10 percent profit on $400 of risk or Capital and don’t want to lose more than 15% of $400."

Dan Sheridan,, August 13, 2019

Assuming SPX was approximately 2926 (close) at time of initiation, the 3070 was some 150 points away to the upside, and the 2660 strike was 266 points lower, total range approx. 416 points.

Can't replicate the $1 credit at this time, more like .55, as VIX is half its former:

Aug 12, 2019: VIX 21.24
11/1/2019 VIX 12.58


DATE Open High Low Close
12-Aug-15 2,880.72 2,943.31 2,877.05 2,926.32
13-Aug-15 2,894.15 2,894.15 2,839.64 2,840.60
14-Aug-15 2,846.20 2,856.67 2,825.51 2,847.60
15-Aug-15 2,864.74 2,893.63 2,864.74 2,888.68
18-Aug-15 2,913.48 2,931.00 2,913.48 2,923.65
19-Aug-15 2,919.01 2,923.63 2,899.60 2,900.51
20-Aug-15 2,922.04 2,928.73 2,917.91 2,924.43
21-Aug-15 2,930.94 2,939.08 2,904.51 2,922.95
22-Aug-15 2,911.07 2,927.01 2,834.97 2,847.11
25-Aug-15 2,866.70 2,879.27 2,856.00 2,878.38
26-Aug-15 2,893.14 2,898.79 2,860.59 2,869.16
27-Aug-15 2,861.28 2,890.03 2,853.05 2,887.94
28-Aug-15 2,910.37 2,930.50 2,905.67 2,924.58
29-Aug-15 2,937.09 2,940.43 2,913.32 2,926.46
2-Sep-15 2,909.01 2,914.39 2,891.85 2,906.27
3-Sep-15 2,924.67 2,938.84 2,921.86 2,937.78
4-Sep-15 2,960.60 2,985.86 2,960.60 2,976.00
5-Sep-15 2,980.33 2,985.03 2,972.51 2,978.71
8-Sep-15 2,988.43 2,989.43 2,969.39 2,978.43
9-Sep-15 2,971.01 2,979.39 2,957.01 2,979.39
10-Sep-15 2,981.41 3,000.93 2,975.31 3,000.93
11-Sep-15 3,009.08 3,020.74 3,000.92 3,009.57
12-Sep-15 3,012.21 3,017.33 3,002.90 3,007.39
15-Sep-15 2,996.41 3,002.19 2,990.67 2,997.96
16-Sep-15 2,995.67 3,006.21 2,993.73 3,005.70
17-Sep-15 3,001.50 3,007.83 2,978.57 3,006.73
18-Sep-15 3,010.36 3,021.99 3,003.16 3,006.79
19-Sep-15 3,008.42 3,016.37 2,984.68 2,992.07
22-Sep-15 2,983.50 2,999.15 2,982.23 2,991.78
23-Sep-15 3,002.43 3,007.98 2,957.73 2,966.60
24-Sep-15 2,968.35 2,989.82 2,952.86 2,984.87
25-Sep-15 2,985.73 2,987.28 2,963.71 2,977.62
26-Sep-15 2,985.47 2,987.31 2,945.53 2,961.79
3,021.99 2,825.51
max min

Saturday, August 31, 2019

Seems a safe bet so what say we meet again here Sept. 27?

SPX Iron Condor -
"Yesterday during a webinar with Ally Invest, I put on an Iron Condor in Sep 27 expiration, 46 days out and with 5 wide credit spreads. Sold 3070 Call and Bought 3075 Call. Sold 2660 Put and Bought 2655 Put. Total Credit $1, and Risk $400. Looking for 10 percent profit on $400 of risk or Capital and don’t want to lose more than 15% of $400."
Dan Sheridan,, August 13, 2019

Thursday, June 20, 2019

Superior Transformation staying long Delta's one day longer....

$400 risk remains in the trade (versus $15k originally) vs. $8000 maximum profit potential (vs. $15k originally).

Tuesday, June 18, 2019

Risk Reduction

June 17, 2019

June 18, 2019

$15k in risk hedged off to credit position, while going from long to short deltas.

Thursday, January 3, 2019

What you see vs. what you get The options risk curve Part II:

Your beautiful risk curve did not provide you with the beautiful profits it seemed to promise on day one.
In our previous installment, we said we asked the experts about this phenomenon, and they gave 12 reasons, nine of which we covered in part I:

1.       Options are more like quantum physics than classical physics.
2.       The map is not the territory.  The risk curve is merely a theoretical model.
3.       Vega – implied volatility -- will make or break you.
4.       Supply and demand are the final arbiters of options value, not risk curves.
5.       Your options may not mirror the VIX.
6.       Market-wide risk is always lurking in the background, even in today’s ever-upward market. A “volatility eruption” has the same effect as extending days to expiration (DTE).  The opposite is true as well:  a “vol crush” is the same as shortening DTE.
7.       Theta expectation is more reliable early in a position vs. late.
8.       Then, there’s the little matter of execution.  If you pay too much, it will affect the P/L of your risk curve.
9.       Anomaly weekend pricing.  Neophyte options sellers think it a great idea to sell on Friday and collect theta over the weekend, but in reality, market makers mark down options in advance of the weekend.  Translating:  there is no free lunch.