Three years ago next week was the start of the crash. Those who were looking for it were already positioned, those who were not still had a few days to establish positions, but most didn't know it. A month later, they did. SPX - March 2020 Some of my best trades ever are already written up and ready to be published to subscribers. They remain in draft form wating for the insertion of the exact options and prices to insert, and of course, waiting for technical confirmation that the crash has started before these new trades go out. Only a series of limit down opens would alter my plans and absent a black swan event, which by definition cannot be foreseen and therefore played beyond having already established positions, small as they may be be, carrying the defenses month to month. February 2020 - Leading Into A Crash I do not expect what is coming to look exactly like what happened three years ago this week, but it could be close enough and if it does the edge will belong to anyone who recognizes it. That particular look is apparent in the chart above, a February 2020 uptrend channel that is broken, than three 120 minute bars that test the underside of the lower up channel trend line, then, all hell breaks loose for four more weeks culminating with a net 34% decline into the March lows. SPX - Current Premium Service Option Trades Mar-Apr-May 2020 Residual legal training: Past performance is no guarantee of future results. VIX An option traders obsession with volatility is well earned when confronted with a chart like this first VIX chart below. During the Feb-Mar crash of 2020 VIX soared from 13.38 to 85.47 in 22 trading days. Out of the money calls bought for pennies on the dollar rose to be $70 in-the-money before it was over. Our standing order is to be long VIX March Calls on any VIX close above 21.00. Here are VIX charts, then (March 2020) and now. VIX Feb -March 2020 VIX Current VIX Calls - Mar 22 vs May 20 VIX options have their own set of monthly expiration dates. We have been focusing on the Mar 22nd expiration for our next trade, but there has been an extraordinary amount of interest in May VIX calls, but not just any May calls, the $50 strikes which are one of those hail Mary way-way-way-out-of-the-money strikes. VIX May 17th Calls On Friday alone, 13,678 of those May 17th $50C were traded bringing open interest to 218,722. Compare the volume and open interest in these May expiration series to what should be much, much higher volume and open interest in the strikes nearer-the-money for the Mar 22 expiration below. The Mar at-the-money $20C traded "just" 2,478 contracts on Friday with an open interest of "only" 63,038. VIX Mar 22nd Calls Buy Signal Pending: VIX If VIX triggers with a close above 21.00 this coming week we are still buying the Mar 22 $25C, but let's add the May 17 $50C as an aggressive, speculative alternative. "50 Cent" A mysterious trader known as '50 Cent' may be placing big bets that volatility in the stock market is about to explode - Linked article A trader called "50 Cent" may be placing big bets that the VIX, or Wall Street's fear index, will surge. Someone bought 100,000 call options for $0.50 each, betting the VIX will pop up to 50 in May. Another 50,000 contracts were bought for $0.51 shortly after the first trade. TSLA After over doubling since the first week of January, TSLA finally took a breather - for a day and a half - this past week, dropping from a high of $217.65 on Thursday to a low of $197.50 mid-day Friday, before recovering into the close to settle at $208.31 or about up 5% for the week. The good news is that if that is all the correction we get after a 100% move up, this stock is soaring out of the box. The bad news that a close above $220 next week and we have to assume that's all the correction we're getting...for now. If TSLA can close above $220 next week, look for a higher risk entry as $300 then beckons, TSLA 240 TSLA 60 Bottom Line: We need a harder pull-back for a high confidence entry Long into TSLA calls. Sentiment is too bullish to chase at these levels. Above $220 and we will have to reconsider as a fresh hourly Buy Signal (new blue up arrow) will likely make its appearance.
