Noise

Don Miller’s video over the weekend has grabbed a lot of attention on twitter. Here’s the link:
http://donmillereducation.com/journal/2018/04/13/the-weekend-trader-eliminating-market-noise/

#Fuzzy Land–Alligators and Atomics :)…

#Fuzzy Land–Alligators and Atomics 🙂 (and Atomic Alligators)
Hi Everyone! Pretty soon this craziness will begin feeling like normal. I’ve got a nice mix of #Alligator traps and Alligator snaps and Atomics that are keeping my account balance relatively stable. After the conversation w/ @fuzzballl on my last post about Alligator Fuzzies, I put the suggestions side and by side and landed back on my original configuration for them. They work really well for long side and short side configs. My SPY beta-weighted deltas are 700, that’s pretty low for me, but it’s giving me stability.
GLD–I’ve got a long #Atomic Fuzzy on this, so no short term hedges. June 128c/128p/125p x 10, 130/134 call credit spread x 14.
FB–I’ve got an Atomic Alligator on this one, a combo. It’s kind of a franken trade w/ mixed expirations, but it’s a short trade around a May 25 165/165/167.5 Fuzzy bear.
IWM–Lots of Alligator traps (bullish) on this, May 153c/153p/150p/ 156c/159c / 156c.
JPM–Today on the dip I put on an Atomic Alligator: May 110/110/105 x 5 @2.08, 115/120 call credit spread @ .99 x 10 (this gives a core trade debit of .10), Apr 20 113 call @ .61 cr x 5.
Q’s and SPY: This is where I have layered in a lot of mixed Alligator traps (bullish) and Alligator Snaps (bearish). It’s a lot to keep an eye on, but having both sure helps with stability on account balances.
SPX: I’ve got a 1-lot Alligator Snap (bearish) on this: May 2665c/2665p/2670c/ 2615p/2595p 2615p

I can imagine someone new reading this post will be scratching their head. I think you can pull the #AlligatorFuzzy for an explanation of the Alligator setup. It’s a mix of a regular fuzzy and Atomic fuzzy. But hit me up if you have any questions.

Have a nice weekend everyone!

Sue

#AlligatorFuzzy Ok, here’s the latest…

#AlligatorFuzzy
Ok, here’s the latest entry into the #Fuzzy family.
Backing up a bit, there’s something every #Fuzzy has in common: A combo trade of a 2-part synthetic (long or short) coupled with protection for full risk definition. 3 legs, all the same expiration.
A Regular Fuzzy (the original one named after @fuzzballl) then uses short dated short hedges for trade debit recovery and weekly income.
An Atomic Fuzzy eschewed the short dated short hedges for a double size hedge using the same expiration as the core fuzzy–solving the problem of runover hedges.
Regular Fuzzy Pros: Efficient use of capital, risk defined, weekly income
Regular Fuzzy Cons: Protection very expensive in high vol, hedges frequently get runover
Atomic Fuzzy Pros: Efficient use of capital, risk defined, partial-to-full financing of protection (particularly useful in high vol)
Atomic Fuzzy Cons: No weekly income, which increases directional risk

Combining these two trades into a new trade solves the cons on both trades–it is essentially a Fuzzy Diagonal. There are two versions, an #AlligatorTrap is bullish, an #AlligatorSnap is bearish.

This trade uses both a long dated hedge (matching the core expiration and quantity) and short dated weekly hedges. The trade, in essence, has a triple hedge! Hedge #1: Core protection, Hedge #2: A credit spread using the core expiration, Hedge #3 A short dated short hedge. Believe it or not…perfectly legal in a 401K. I will be attaching a slide showing risk graph setups, a proper diagonal setup on the risk graph should significantly reduce the hedge runovers.

Here is the exact trade setup that I did last week for a long on SPY (captured on the attached slide)
SPY May monthly: +263c/-263p/+259p (this is the core fuzzy) @5.62 debit, then add a CCS 269/273, same qty, @1.55 cr. Then enter the weekly income hedge: Apr 6 270c @.63.
Particular setup rules: 1. The 3-leg core debit = “X” 2. Use ATM + X for the anchor short leg of the CCS. Those 5 legs should give you a “ledge” type risk graph where the ledge is solidly above 0. Finally add in the short dated short hedge–the best graphs work up with the calls at the same strike as the CCS anchor on the long dated core, or higher.

Everything can be reversed for a bear trade. Here’s an Alligator Snap (bear)trade I did on QQQ this morning:
Jun -157c/+157p/+160c @ 5.09, 152/147 PCS @ 1.34 cr ($157-$5=$152 for anchor). Then an Apr 6 152 short put @ .77. This puts the starting trade debit at $2.98. Accrued credits on rolling the short dated hedge will attack that trade debit. The bear side of this trade, due to put skew, will allow for more lucrative put rolls in an uptrending market.

So, in conclusion, this trade brings the best parts of the regular fuzzy (weekly income) and atomic fuzzy (protection financing) together. Check out the attached slide for risk graph setups, let me know your questions. I have about 8 of these trades on right now, 6 traps and 2 snaps. I’ve already rolled short hedges from last week.
Thanks to @MamaCash for the creative name…I was just going to call it a Fuzzy Diagonal….but Alligators are way more fun 🙂

Alligator

2 of 3 of 5: Not yet!

Y’all know I’m keenly watching for 1-standard deviation up moves in SPX. We need 3 1SD up moves in a 5-bar window (for historical rally confirmations). We got one on Thursday. Today’s slipped through the fingers, darnit. We got a .933–the rule is it must cross 1.0. Wed and Thur still fall into the 5-bar window.

#AlligatorFuzzy anyone? I have a new #Fuzzy! I believe this is the best one yet. The love-child of regular fuzzy and atomic fuzzy. I will do a full write up on it maybe later tonight. I really think you will find it very compelling.

Sue

#vixindicator

FB update

Hi everyone! The FB #PutRatioJadeLizard from yesterday was closed today for 33% profit. My target was 50% but, as you know, when a underlying hits the right-side slope of a Jade Lizard risk graph the accrued profits start dropping off. But I opened a new #IronCondor on it. Because the alternate sides have different strike widths I skewed the contract amounts.
Apr 20 150/155/182.5/185 5×7 IC (5 on put side, 7 on call side), net credit 5.83, BE 153.80/183.30

I plan to layer in a lot of SPY Put Ratio Jade Lizards whenever there’s a 20DTE on the chain.
Today: Apr 11 +273p/-272p x2 @2.37cr, -275/277 CCS @ .69 cr

A long time ago I wrote about waiting for a 3-of-5 bar 1-standard deviation up move before trusting a rally. It’s looking like that might be a good rally indicator, only because we can’t seem to barely get a 1-SD up move at all. In SPX we now have 16 straight bars I think with a 20-day 1SD up move rolling total of 1. I’ve only found 3 times in history going back to 1987 where we’ve gone this long with so few 1SD up moves. It speaks to the choppy nature of markets, and to not get faked out on rallies until a solid string of 1SD up moves unfolds. I’m watching it every day, will obviously keep posting about it.

Sue

#pietrades

FB #PutRatioJadeLizard I’m focusing on…

FB #PutRatioJadeLizard
I’m focusing on 3-way trades now…theta positive trades with wide profit ranges that will make money with an underlying move in any direction. Lately my fav trade is to combine a put ratio spread (the pit-traders’ fav) with a Bear Call Spread for a Put-Ratio-Jade-Lizard. Here’s the trade I did today on FB:
Apr 6, bought 160 p x 2, sold 157.5 put x 4 for 2.35 net credit, 170/172.5 Call Credit Spread for .70 cr x 2, total credit is 3.05, since it’s greater than the CCS-width there is no upside risk. Break even is 152.60, with max risk being assignment of 200 shares of long stock at that level. So, that allows for a substantial continued downside move, or not. I did the trade awhile ago, it’s already up about 25%.
Sue
p.s. anyone else having trouble w/ email updates on posts? nevermind, my browser notifications were disabled somehow.
p.p.s Nice background Jeff!

March 12 #Fuzzy Land Very…

March 12 #Fuzzy Land

Very excellent day here. All of the unhedged #Fuzzy that I opened on Friday were closed today for over 50% profit–and I pretty much had a lot of them. Q’s were reset and again closed for a lot of profit. Closed Fuzzies for the quarter now have a 47 handle! I’m still shooting to regain that 50 that I had in January.
Opened some new unhedged Fuzzies today in SPY, but when I saw resistance and rising VIX I atomicized them. Here is an example:
SPY #AtomicFuzzy April Expiration: 280c/-280p/277p @ 2.93 x 21 contracts, 284/288 Call credit spread @ .92 x 36 contracts.
I’m flat on Q’s right now, they are showing signs of trend exhaustion right now, so I’ll be patient for the right entry.