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Proactive Spreads, August 18th, 2020 – CMI, AMZN, BRK/B

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And just like that, it’s gone. The market has fully retraced all the losses from February. Granted, most of the gains are from just a handful of stocks, but there’s nothing like price moving higher to change the narrative about stocks.

The market is still overhedged. Right now, the market has a realized volatility of 11%. The VIX Sep futures are currently in the 20s.

It’s stinkin’ hard to sell the market off when hedges are that rich. Any pullback and those hedges will peel off quickly, causing a floor to setup in the markets.

Trend is up, and until the market shows a shift in character we need to assume the trend will continue.

Trade #1: CMI

CMI has had a nice run, and is creating a consolidation pattern near its highs. I’d like to see just a bit more of a pullback for an entry point. This is our second attempt trying to play this long.

Trade Setup

Expected Price: 208.16

Sell to Open CMI 18Sep20 185/180 Put Spread

Tier 1: Enter at 0.7, Exit at 0.04

Tier 2: Enter at 0.98, Exit at 0.17

Tier 3: Enter at 1.26, Exit at 0.21

Stop Out If Close Under 184.89

 

Trade #2: AMZN

AMZN had a monster breakout and looks ready for continued upside. It could gap up and run without us, but odds are a day of rest or a small pullback will get us involved.

Trade Setup

Expected Price: 3312.49

Sell to Open AMZN 18Sep20 3085/3080 Put Spread

Tier 1: Enter at 1.3, Exit at 0.67

Tier 2: Enter at 1.82, Exit at 1.18

Tier 3: Enter at 2.34, Exit at 1.59

Stop Out If Close Under 3084.89

Trade #3: BRK/B

Looking for a retest of the previous resistance to act as potential support. We’ll start scaling in just above that.

Trade Setup

Expected Price: 205.25

Sell to Open BRK/B 18Sep20 200/195 Put Spread

Tier 1: Enter at 0.98, Exit at 0.29

Tier 2: Enter at 1.372, Exit at 0.642

Tier 3: Enter at 1.764, Exit at 0.854

Stop Out If Close Under 199.89

 

 

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