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Proactive Spreads, August 5th, 2019 – TLT

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The animal spirits are at it again…

S&P off 3% on the CNY currency adjustment news. Last time that happened was Aug 2015 and we were off 5% in 3 days. I don’t think this will be like Aug 2015 because we knew it was a distinct possibility in ratcheting up the trade war.

As I type this in the overnight session, the ES futures market is down another 50 handles.

Believe it or not, this is the most ideal scenario. A gap down after an ugly Monday trade sets us up well for “turnaround Tuesday.”

Right now, we’re pretty loaded up with put spread sales, so no need to add to new stock setups.

We’ve been smart and picked our levels and scaled in, but it never feels good when the rug gets pulled into the market. Make sure into any bounce that you are aggressive in scaling out of your Tier 3 and Tier 2 positions, as odds are we will retest the low whenever it gets carved out.

Trade #1: TLT

 TLT is overbought, but I want to see a little more of a stretch to start fading this move. We should see it if the gap higher holds tomorrow.

Trade Setup

Expected Price: 140

Sell to Open TLT Sep 145/147 Call Spread

Tier 1: Enter at 0.30, Exit at 0.05

Tier 2: Enter at 0.50, Exit at 0.25

Tier 3: Enter at 0.70, Exit at 0.45

Disclaimer

U.S. GOVERNMENT REQUIRED DISCLAIMER – COMMODITY FUTURES TRADING COMMISSION. FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS. DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS WEBSITE IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS WEBSITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY, SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN