I am the shadow on the moon at night,
filling your dreams to the brim with fright.”

— Oogie Boogie (Movie: Nightmare Before Christmas)

 Commentary

Oogie Boogie

The nation’s fright-fest is almost over.

2020 has been a nightmare, and Oogie Boogie did a great job is filling our dreams with horror. But with the election almost behind us, maybe we will start acting like one nation under God – once again.

An extraordinary amount of journalistic and political capital was spent thorough out 2020 to inject the “fear of Trump” into the nation. And from my perspective, this was a brilliant DNC tactic from the start.

Before the pandemic, the Democrats had scant little to hang their hat on for a national presidential campaign. The candidates failed to ignite any policy enthusiasm. And the defense for “Socialism” and a “Green New Deal” scared many people on both sides of the aisle. No Democratic candidate was catching the eye of the public. (No John Kennedys here…)

More bad luck for the Dems – the economy was roaring, foreign policy was brilliant, and the Never-Trumpers were falling over each other. The Muller Report was a dud, and impeachment falls flat (coming across sadly as partisan misconduct of a serious constitutional process).

With nothing the DNC strategist could offer early on, they executed one of this century’s greatest political gambits

Presidential Rope a Dope

When you look at Trump’s persona, you have to see two sides of one coin; 1) an aggressive political tweaker (a good thing if you are conservative) and 2) an egotistical ass (a bad thing if you are human).

Then somewhere deep in the bowels of the political White House, someone convinces Trump’s #2 persona to demonstrate his – inborn leadership skills by taking personal responsibility and deliver us from under the pandemic, a made for TV opportunity. And once that hook was set in his ego, the rest was easy.

Now the election was all about how Trump handled the pandemic…

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Start Running the Table

Mayor
The Two-Face Politician

Now seeing that a “Vote against Trump” might be a better winning strategy over “Vote for Whoever,” all the DNC activists had to do is show the nation just how badly Trump will mismanage one of the defining issues since 911. They had six months to peel away support and trust in the president to get traction for their candidate. 

And so they began to run the table… 

Exacerbate the COVID Issue:

  1. Paint the pandemic to be the next Black Death
  2. Constantly harp that two million Americans will die from COVID-19 by October
  3. Punctuate the rising number of COVID infections as proof of inaction
  4. Report that Trump is ignoring suggestions from the “scientists”
  5. Constantly have contrary reporting for every Trump news event
  6. Convince people they cannot trust Trump’s pandemic leadership
  7. Have no hope for a vaccine, and if one comes out, DON’T TRUST IT! 

Oggie Boogie says “BOOOOO”

Pull the Plug on the Trump Economy:

  1.  Lockdown as many businesses as possible. Maximize the pain by keeping them closed longer than necessary.
  2. Push as a necessity, astronomically high dollar stimulus packages sending the national debt to historic highs
  3. Shutdown the travel and leisure industries for as long as possible
  4. Do not report high re-employment numbers. Just fixate on the new unemployment benefits.

Oggie Boogie says “SCREEEEECH”

Inflame National Unrest:

  1. Provide space and police restraint for encampments, rioters, and looters – ”consider it reparations for slavery….”
  2. Give a supportive and sympathetic voice to those who want to tear down monuments – “it’s very American to protest…“
  3. Disproportionately report police shooting of blacks – “emphasize racial injustice…”

Oggie Boogie‘s eerie Hooowl

Gross Exaggerations:

  1. 10 million people will lose their medical insurance just as the pandemic explodes this Winter
  2. Impeachment 2.0
  3. It will take more than ten years for the economy to recover
  4. Trump will postpone or cancel the elections
  5. The credibility of the Supreme Court has been destroyed
  6. Russa is actively manipulating our election
  7. Trump will be indicted immediately after leaving office
  8. Trump hates Blacks
  9. Trump hates the military

Oggie Boogie’s ghoooostly cry

Stoke as Much Fear as Possible:

  1. Refrigeration truck outside of hospitals
  2. Grandma contained behind glass
  3. Trump will not honor the results of the election if he loses
  4. Burning police cars
  5. George Floyd murder replayed over and over
  6. Severe Democratic Senate retaliation (such as court-packing or DC statehood)
  7. Pulling down statues and removing historic national monuments

Oggie Boogie‘s frightening shrieeeek

Address the Lack of Enthusiasm for Biden:

One of the biggest DNC letdowns after the Democratic Convention was polls showing the extraordinary lack of enthusiasm for candidate Biden amongst democratic voters compared to President Trump’s historic high enthusiasm amongst republicans. Fearful that the democratic voters would not expend the effort to go out and vote on Election Day, Democratic Governors started mass-mailing and mass-promoting mail-in ballots to everyone on their voter’s registration list.

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But Hark, the Herald Election Will Soon Be Over.

This rope-a-dope’s end goal was to make the nation angry, scared, mad, in-need, and distrusting – then point all fingers to Trump. And now, with the election almost over, maybe we can stop with the histrionics and start being supportive.

Throwing the Country Under the Bus

I now have a lot of contempt for our national media and the Democratic leadership. This year, they threw the country under the bus in hopes of affecting the election. A free press is the essence of a free society, so I do not advocate any changes. But whether CNN (and others) are Democrats or Republicans, Progressives or Conservatives, Religious or Atheistic – they all should be Americans!

We all should be looking out for each other during times like these. Encouragement and mutual support are the most excellent remedy to stressful times. We seem to have forgotten that this year.

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This Week’s Market Sentiment

(As of 10/26/2020)

This Market Sentiment is as of the start of my trading week. This analysis is typically completed by midday Monday morning, and I will use it to help guide my trading decisions for this week. By the time this journal is published, it will be a week old.

VIX: Broad Market Volatility

VIX 9-Day SMA remained mainly flat at 27.6 from 27.4 last week.

The VIX is an emotion-gauge for the general investing population. It is thought to be driven by the Marketeers’ current level of greed or fear. As a one-month forward-looking volatility matrix, it is not designed to tell us which direction the market will be going, but more of how fast it can get there.

A VIX of 15% is assumed to be a market at rest. But since the intrinsic nature of the Stock Market is to move up, a VIX closer to 15% or below will have an innate tendency to rise.

CBOE Market Volatility Index

Bouncing up to near 29%, the VIX remains steady sideways as we head toward Election Day.

The VIX still suggests that any new position opened this week will yield a higher premium. But with the National Elections just next week, there still appears to be some Marketeer uncertainty as to whose financial policy will rule for the next four years.

Put/Call Ratio:

9-day SMA (all OCC options): ended mostly flat 0.60 from 0.58 last week.

Put Options are frequently used as protections against existing investments falling. When the ratio between Put Options bought versus Call Options bought is above 1, then this is an indicator that the Marketeers are buying insurance to what they may see as declining Markets. Conversely, when the Put/Call Ratio falls below 1, then there is a general sense that the broader Markets will increase, and more investors are buying more than selling.

Daily Put/Call Ratio for all OCC Options

The Put/Call Ratio continues to be out of sync with the other four indicators. Although the S&P 500 continues to thrash and the VIX is shouting uncertainty. Marketeers seem to have a curious lack of interest in protecting their current portfolio.

I will assume that the majority of the Market’s activity is with realigning assets.

Consumer Sentiment Index (CSI):

The Consumer Sentiment index hopes to take a broad snapshot of what we all feel to be the direction of the U.S. economy. It measures how consumers feel about their personal financial situation and compares that to what they believe is happening to others throughout the country. The survey contains 50 questions and is conducted to more than 500 people each month.

A low rating is a general dissatisfaction with our current management of U.S. economic policies. This dissatisfaction will imply that something has to change.

A high satisfaction rating suggests approval of the current policy management and implies market stability.

The U-M’s Consumer Sentiment Index (CSI) has not changed since last week. The general sentiment seems to be a wait and see game on how the election pans out.

As a long term trajectory, I would believe that the market rebound will continue.

Market Indexes:

DOW = 28,336 – Down 0.9% from 28,606 last week.
S&P 500 = 3,465 – Down 0.5 % from 3,484 last week.

The S&P 500 is a stock market index that tracks the 500 largest companies in the U.S. This index represents about 80% of all the capitalization for the country. The S&P is widely considered the best indicator of how all the U.S. markets are performing.

Daily S&P 500 Index – Four-Months

Again last week, the DOW felt the effects of a near 800 point swing. But the volume remains low.

The S&P 500 current value is dropped below the 9-Day SMA for most of last week as the market experienced a pullback. But towards the end of the week, a mini-rally appears to have bumped the S&P back up. Hopefully, this is a signal of a rebound.

The S&P 500 continues to show a toehold into the bullish trend. With the election just one week ahead I will suspect only a “minor” reaction.

Geopolitical Tree-Shakers (GTS):

  • Pre-election Stimulus Bill in dought
  • How mass-flooding of election ballots affects election integrity

My sentiment for this coming week:

All five of my indicators (S&P 500, VIX, Put/Call Ratio, CSI, and GTS) have mostly flatlined over the past month. And with the markets (COMP, SPX, and IWM) hovering around their all-time highs, there seems to be very little ship-jumping prior to the elections.

But this may only be the calm before the storm as the VIX is still high. There is still a lot of uncertainty about knowing the election results before we go to bed on Nov. 3rd.

With the Democrats backing a Green New Deal, raising taxes, reduction of fossil fuels production, and national mandates to address the pandemic, one would think the Marketeers would continue to withhold the cash pulled from the COVID Crash until after we see how a new Administration will reset our economic policies. But with the markets still near all-time highs, it appears that the Marketeers have already decided the likely winner.

Consensus suggests the Bulls will plow through the election results but expect some wild market thrashing as they trample through. If I were smart, I would not open a new Option Spread that spans Election Day – but I haven’t been smart all year, so why change now. 

This week, I will focus on:

  1. Limit the max risk per trade to < $1,000.00
  2. Short Stike Price to be > 6% below the current underlining’s price
  3. Keep the week’s total dollar risk < $1,000.00
  4. Keep the overall dollar risk to be below $3,000
  5. Will focus on mid-term trades: 4-5 weeks
  6. Credit spreads only (need positive cash flow for psychological reasons)
  7. Will consider only Bull Spreads
  8. Set alarms
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Profit and Loss Statement

(As of 10/30/2020)

Year
2020
Month
Oct
Week
#44
Beginning Account Balance$9,000.00$2,418.99$2,689.88
Deposits (Div. & Int.)$38.54$0.00$0.00
Withdraws (paycheck)-$2,625.24$-250.00$-250.00
Premiums on Open$5,655.00$308.00$0.00
Premiums on Close-$9,570.00-$32.00-$0.00
Fees Paid (total)-$167.42-$5.11-$0.00
Ending Account Balance$2,439.88$2,439.88$2,439.88
Total Gain/Loss-$6,560.12$20.89-$250.00
ROR11.2%0.0%
ROC-44.1%

Realized Profit by Strategy

Year
2020
Month
Oct
Week
#44
Vertical Bull Put Credit Spread-$3,931.75$240.89$0.00
Vertical Bear Call Credit Spread-$182.79$0.00$0.00
Vertical Bull Put Debit Spread$0.$0.00$0.00
Vertical Bull Call Debit Spread-$66.83$0.00$0.00
Icon Condors$0.$0.00$0.00
Cover Calls
Total-$4,181.37$240.89$0.00
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Schedule for this Week

Goals for this week: (10/26/20 – 10/30/20) (Week 44)

  • Document lessons learned or new thoughts
  • Open new positions
  • Update Trading Log as trades occurs

Entry Rules for Vertical Bull Put Credit Spreads:

  • Current maximum dollars at risk < $3,000? Yes/No ( )
  • Max dollar at risk this position < $1,000? Yes/No ( )
  • Max time to have any dollars at risk < 4 weeks? Yes/No ( )
  • Is the long-term trend (four months) bullish? Yes/No (see chart)
  • Is the short-term trajectory of the underlying bullish? Yes/No (see chart)
  • Is the Put/Call Ratio < 1, (or falling if it is > 1)? Yes/No ( )
  • The current price above 9-Day SMA?: Yes/No (see chart)
  • 9-Day SMA above 50-Day SMA?: Yes/No (see chart)
  • Is the Short-strike > 1 SD below the current price? Yes/No ( )
  • Is the short-strikes Prob-OTM > 70%? Yes/No ( )
  • Short-Strike price below trend channel at expiration?: Yes/No (see chart)
  • Current price within bottom 1/2 of Trend Channel?: Yes/No (see chart)
  • Is the long-strike at maximum width? Yes/No (?? strike width)

Monday:

  • Determine/update this week’s market sentiment section
  • Calculate/record Put/Call Ratios for all stocks on the watch list
  • Review/tweak Trend-Channels for all stocks in the watch list
  • Set target expiration dates for all options as follows:
    • Bull Credit Spreads: Nov 20 (<4 weeks)
  • Look up Ex-Dividend dates for positions in/approaching ITM (MarketWatch/Calendar)
  • Stage possible trades for all watch list stocks by 10:00 AM
  • NO TRADING BEFORE 10 AM. (Let the Market find its direction after the weekend.)
  • Watch one Webcast or take one online mini-course to be completed by Friday.

Tuesday – Thursday:

  • Review how yesterday’s staged trades moved. Adjust premiums to take advantage of movements.
  • Submit a couple of Spreads, but keep a close watch. If one is accepted, cancel the others (we want only one new active trade per day).
  • Be mindful of Entry Rules.

Friday:

  • Review the total technical dollars at risk for this week. If significantly below $500, then submit additional spreads if prudent.
  • Update and post weekly journal (this blog) with any lessons learned or strategy changes.
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This Week’s Trade Activity

(As of 10/30/2020)

Spread Count Summary:

Year
2020
Month
Oct
Week
#44
Vertical Bull Put Credit Spread6930
Vertical Bear Call Credit Spread1200
Vertical Bull Put Debit Spread000
Vertical Bull Call Debit Spread700
Iron Condor000
Total8830

Current Dollars at Risk:

Year
2020
Month
Oct
Week
#43
Vertical Bull Put Credit Spread$1,790.00$1,790.00$0.00
Vertical Bear Call Credit Spread$0.00$0.00$0.00
Vertical Bull Put Debit Spread$0.00$0.00$0.00
Vertical Bull Call Debit Spread$0.00$0.00$0.00
Iron Condor$0.00$0.00$0.00
Total Dollar Risk$1,790.00$1,790.00$0.00
Max Risk Allowed$3.000.00$1,000.00

New Trades Opened This Week

(10/26/2020 – 10/30/2020)

No newly opened positions this week. The markets went nuts at the start of the week as the Marketeers appear to be fretting about the election next week. I’ll hold off until then.

Trades Currently Cooking

(As of 10/30/2020)

DIA: 262.5p/252.5p  – Open 10/21/20 – Expires 11/13/20 – Max Gain = $109.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=80.4%, Head Room=-7.1%, Max Loss=$890.00, IV%=22%
Now: Prob. OTM=54.4%, Head Room=-1.0%, IV%=36%

QQQ: 267p/257p  – Open 10/14/20 – Expires 11/06/20 – Max Gain = $101.00
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.2%, Head Room=-9.8%, Max Loss=$898.00, IV%=32%
Now: Prob. OTM=55.9%, Head Room=-0.9%, IV%=41.2%

Trades Closed This Week

(As of 10/30/2020)

No positions were closed this week. Getting closer to the election plus my spending money getting thin, so I don’t have too many working positions.

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Conclusion

The DOW dropped 1,834 points this week (nearly 6.5% loss), and the S&P 500 fell over 5.6%. I will suspect that Monday and Tuesday of next week will be high volatility as well.

If the elections’ results are not too clear by Wednesday morning, then I will need to take a hard look at my QQQ position, which is set to expire next Friday.

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Disclaimer

Even though I have tried to make it clear that this blog is my journal, documenting my trek into Options Trading, it has been suggested by others that I, nevertheless, include a general disclaimer. So here goes…

“This blog and the information contained herein is not intended to be a source of advice or analysis concerning the material presented. The information and/or documents contained in the blog do not constitute investment advice.”

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Contact Me

To contact me or ask me a non-post related question, please use this form. If you want to comment on this post’s topic, please use the “Leave a Reply” box below so it can be attached to the post for future reference. – Thanks

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