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Proactive Spreads, August 27th, 2019 – TGT, GLD

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I was foaming at the mouth on Sunday evening.

After a 3% drop on Friday, the futures markets opened down 1.5%.

That’s fine, I thought… and I went to bed knowing if we were at those levels into Monday’s open, we’d probably see some capitulation. Then we could be aggressive fading the move into the drop by playing SPX, TLT, VXX, and GLD.

When I woke up the next morning, the selloff was no longer there. We started to go green.

Well, that changes the gameplan.

My opinion on this market has shifted about 6 times over the past 48 hours. When this happens, I know that my sensitivity is turned too high and for the broad markets I don’t have an edge. Which is fine, there’s no need to force trades.

We are, right now, in the middle of a high reversion range where the market is easily moving 1% in a single day. Getting aggressive in either direction here is recipe for disaster.

To me, it would’ve been a lot easier to trade had the markets properly dropped and the SPX tested 2750 into Tuesday. Aggression would be warranted.

But here, at these levels… not much to play.

My thoughts on this are also compounded with the current positioning on. If you’re looking for positions to put on, just go back over the past month and a half of the newsletter acrhives and you’ll find plenty of open positions that you can enter into at a better basis than I have. Most of these trades expire into September opex, so I’m closely monitoring those if I need to adjust.

This time around, we’ll look at a layup setup in TGT and a capitulation trade in GLD.

Trade #1: TGT

Massive gap higher to new highs on earnings. I want to play a pullback to the earnings day open.

Trade Setup

Expected Price: 99.87

Sell to Open TGT Oct 92.50/90 Put Spread

Tier 1: Enter at 0.40, Exit at 0.10

Tier 2: Enter at 0.65, Exit at 0.25

Tier 3: Enter at 0.80, Exit at 0.35

Trade #2: GLD

I want to take a contrarian bet in GLD into the next spike. This trade has done reasonably well over the past few months as long as we got the timing right.

The overnight high is 145.88– I want to see a squeeze above that to take advantage of panicked buyers.

Trade Setup

Expected Price: 147.18

Sell to Open GLD Oct 155/158 Call Spread

Tier 1: Enter at 0.47, Exit at 0.17

Tier 2: Enter at 0.67, Exit at 0.27

Tier 3: Enter at 0.87, Exit at 0.37

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