A Great Set-Up!

So the markets have tanked. Can't say I called it, but I did say that the bull market is over. just a couple weeks ago. That means that vol has gotten jacked.

So I've sold an iron condor on the SPY ... with the short puts down at 170. Damn! 167/170/203/206 iron condor, 50% PoP, and 1.00 credit. Much more room to the downside than the upside, which is better in my opinion. Despite today's rally, I think the markets will slog it out to get back up above 2000, and not have a V-bottom like back in October. During which time, vol oughtta contract, which leads to the second trade.

If the SPY does in fact rocket back up and the all clear signal is given to BTD, I bought some far OTM puts on the VIX. I picked up some 13 NOV puts for 0.20. If the VIX declines back to where it has been all year, the reverse side of the SPY returning to where it has been all year, then those puts will skyrocket in price. That surge should cover losses due to Delta on the SPY position, and I say Delta because if the SPY goes back up to "normal" levels, vol will contract and suck premium out of the options. And, since the short SPY puts are so far away, I have plenty of room to roll them up should things get hairy.

If the markets continue to decline, vol should go even higher, which means rolling down the short calls would be more advantageous. The VIX puts may be a wash, but they only cost 0.20!

Overall I have 5% of my portfolio at risk in these trades ... 4.66% in SPY and 0.33% in VIX. With that, even a full loser on both positions wouldn't hurt too terribly bad (full losers are incredibly rare if you're paying attention ... you can get out!).

HD Missed Opportunity and The Verge of a Bear Market?

No, I found it. I profited from it. But execution-wise this was an opportunity missed.

Home Depot HD was following a classic Bollinger OB scenario, and the markets started to roll over. So, I got short, with a plan to leg-out of the put spread when it passed 119.

I didn't.

I still made a $360 profit on the position, but I could have made over $1000.

Legging-out is very hard to time, unfortunately. And since you expose yourself to "pure" delta, you have to be damn sure once you take off that short leg that momentum will continue in your favor. If it reverses, your gains could be washed and could turn into losses very, very quickly.

So although it could have been better, I'll take $360 profit any day.

In other news, stocks are really rolling over on China. S&P dipped (and is currently) below 2000, and while that's arbitrary, it's a clean break from the trading range we've been in for about 7 months. Not good. While I am not sure on whether or not to short the market, I stand at the ready to sell VIX calls and SPY/SPX puts or and Iron Condor, cause vol is getting juiced.

With the big leaders in the market selling off visciously over the past couple of weeks, it would not surprise me if a "correction" is on the way and potentially a mini bear market. I say "correction" because this market hasn't gone anywhere all year and looks quite toppy. But, with the Fed still around, I don't think a prolonged bear market is in the making. China will go down into a steep recession probably in the next year or 18 months, and a bear market in most assets will surely accompany that. But, that's not for awhile. I wouldn't step in and buy-the-dip here, though, because ... where has the market gone all year? There's no point in BTD when the market is not trending higher, y'know?

Dude, Where's My Market (Going)?

Ok, so I don't like to make market commentary all that much. But I gotta comment here.

Where the hell is the stock market going?

For all of 2015, the S&P 500 has done nothin' but bounce around 2100. Sometimes a little, sometimes a lot. There are a lot of theories as to why:

• The markets are unsure about the future!
• The markets are awaiting a rate hike!
• China!

So, maybe all of those are true, to a degree. Without full on stimulus (beyond ZIRP) from the Fed, stocks don't march higher. Plain and simple, the stock market has been ushered into an artificial bull market by the Fed's asset purchase programs and their promise to back-stop whatever downturn may come in the markets. Analysts have only been searching the garbage (economic data) to attempt and rationalize/justify that the bull market since 2009 has been a result of economic growth and not Fed stimulus, at least not entirely.

There are a couple of problems with that notion. First, the bottom three quintiles of income earners in America have been in stagnation really since 2007, and you could argue for far longer. Second, what economic growth? Third, corporations are not reinvesting in their companies. 

All corporations are doing now are buying back stock, buying other companies, or increasing dividends, all in order to appease the shareholders. Major corporations outside of media have done little in the way of broad based expansion that has been seen in almost all other expansionary times in recent economic history. 

Back to the stock market in 2015. We've basically gone nowhere for 10 months, something that has not happened in many years. Bulls will say that it's a "breather," and that after two years and a 45% gain its only natural to take a break. Fair enough, I suppose, but the market doesn't make moves ... investors do. The dog wags the tail.

Investors are afraid of a tightening Fed. Now, everyone knows my thoughts on the Fed's supposed oncoming tightening cycle. Ain't gonna happen. But not everyone is as skeptical as me and believe the shit coming from Yellen's mouth.

If I am proved wrong, I would worry for investors. The stock market has not "survived" a tightening cycle hardly ever.

In 1994 the Fed raised the FFR from 3% to 6%, and the S&P 500 didn't budge the whole year. Hardly a collapse in stock prices, but the economy was also moving along speedily, and it was a result of "real" growth. In the summer of 1998 the S&P fell from 1180 to 980 and the Fed responded by cutting the rate from 5.5% to 4.5%. The market took off as a result ... this was when the "Greenspan put" was coined. From June 1999 to June 2000 the rate was raised from 4.75% to 6.5%, the NASDAQ collapsed and stocks entered the bear market of 2001-2003. The Fed responded by cutting rates from 6.5% to 1% from 2000 to 2003. Starting in 2003, not coincidentally, the market took off.

The Fed then engaged in raising rates from 1% to 5% from summer 2004 to summer 2006. Guess when the housing bubble popped. Yes, that's right, late summer 2006. Stocks lost half their value in the coming years despite the Fed renege of cutting rates to 0%.

In other words, a Fed tightening cycle would spell disaster for the market. If cutting rates from 5% to 0% - ZERO PERCENT - did nothing to save the imploding market, what the hell can? Surely not a cut from 2% back to 0%, because that's probably about how high the Fed's gonna be able to get. The Fed has no firepower left to stem a market sell-off. Even another round of QE won't do the trick, because that will probably scare the hell out of investors since the accepted narrative is "all clear for raising rates, the economy is doing pretty good now."

If China gets worse, which it more than likely will, I smell trouble for US stocks in 2016 and 2017. It took about a year and a half for stocks to catch on to the fact that the credit boom of 03-06 was collapsing, hence their delayed sell-off until 2008. China's crumbling is the catalyst this time, it looks like. 

The bull market of 2009-2014 is over.

AAPL and DD

standard vol selling here.

AAPL 100/105/125/130 SEP15 @ 1.15 x 3 [61 PoP]
DD 47.5/50/57.5/60 SEP15 @ 0.50 x 5 [65 PoP]

Portfolio at risk, 7.1%

I'm pretty far away from the market on AAPL on both sides but I'm pretty close to DD on the call side, however, that's probably more balanced since DD is in a downtrend but is nearing support and could bottom out soon.

Vol overall is down across the market right now and nothing looks good directionally either. I thought TWTR might break down but I prefer to play reversals at support/resistance rather than breakdowns/breakouts and continuations. I feel they're less reliable, and I'm no good at trading momentum.

I think there will be more volatility towards mid month as people frantically pour over the data to see if a rate hike is coming. IMHO, if this Friday's jobs report is "bad," Granny Yellen will hold off on that 0.25% hike. Which obviously would not surprise me, but I think there's a 50/50 chance for a September hike and a 75% chance that FF rate will be 0.25% by year's end. But remember, I don't count that as a hike because 0.25% is just the top of the current target range!

AAPL Melting Down??!?!?!!?

AAPL is one of the darling stocks in the American market. This company can do no wrong. They're gonna sell a bazillion of those watch thingies and it will be awesome, right?

WRONG

Who seriously thought the AppleWatch was a good idea? Who? THAT'S Timmy C's big innovative new creation? The thing everyone and their mother speculated Apple was gonna make next, so he said, "Alright, what the hell, y'know?"

And who thought they would actually sell a lot of them? It's an overpriced gimmick! Google Glass, anyone? Fucking dumb!

So investors basically gave AAPL the ol' fuck you and it's selling off. Why? Oh, China is bad! Bitch, Chinese GDP per capita is like $5000. A new iPhone 6 is like a tenth of that. 10%. Fuck China, IT'S NOT A DEVELOPED MARKET. HOLY FUCK. Oh, they didn't sell that many watches! NO FUCKING KIDDING. 

Rant over. But seriously, AAPL's sell off is really fucking dumb. However, it has goosed vol, which means I'm about ready to start selling premium. I hate that word too. Fuck premium. 

Maybe tomorrow, I don't know. It's on the radar.