Two days ago, it felt like the breakdown was coming and the end of western capitalism was just around the corner.
And today, we’re seeing a massive rip higher.
Friendly reminder that stocks go up AND down, not up OR down. We’re still rangebound, volatility is high, and reversion is high.
The macro risk that everyone is now fixated on… rates. For some reason treasury yields above 3% are not good for stocks. The last time we had a raising-rates environment the market continued to grind higher, yet right now the market’s psychological anchor is on that 3% level.
The micro risk, specifically the risk of single stock movement… well, that’s going away. More and more stocks are reporting earnings and it’s not a disaster. This quarter feels like a “wash” and that is reinforced by the fact that we’re still rangebound here.
I’ll go ahead and stress patience on new entries. Markets are stuck in the middle of a range and we haven’t seen true, trending volatility for a while.
Trade #1: GOOGL
If GOOGL loses 1,000 then it’ll be a very swift move lower. I’m not sure if we’ll lose that level but I want to be ready if it does.
Expected Price: 970
Sell to Open GOOGL Jun 915/910 Put Spread
Tier 1: Enter at 0.80, Exit at 0.50
Tier 2: Enter at 1.10, Exit at 0.60
Tier 3: Enter at 1.40, Exit at 0.90
Trade #2: VMW
Looking for a bit more of a pull in and I expect these levels to hold.
Expected price: 130
Sell to Open VMW Jun 110/105 Put Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 1.05, Exit at 0.55
No Tier 3 (Earnings Up On Deck)