Holly Filibusters, Batman! The $1 trillion infrastructure bill is a win-win for all sides.
Yes Robin, except it is a devastating defeat for the Progressibles (filiBusted by the Cape Crusaders).

GetTing Rid of the Filibuster Bomb

One of the most fun scenes in the 1966 “Batman the Movie” was when the Cape Crusader desperately tried to get rid of a bomb. But, unfortunately, everywhere he intends to throw the bomb, there were either people or cute animals milling around – preventing him from getting rid of it. All of which prompted the quote:

“Some days, you just can’t get rid of a bomb!”

This comedy routine reminded me of the “filibuster bomb” running around in the U.S. Senate.

What is the Filibuster Bomb?

The filibuster bomb is the Democrats threatening to trigger the “Nuclear Option” again and end the Legislative Filibuster Rule in the Senate. The nuclear trigger was pulled once before in 2013, and it did not end up well for the party that pulled it.

The bomb is scurrying around in the Senate because the 2020 election gave the Democrats a surprising (think Georgia Senate races) majority in Congress, plus the Presidency. This trifecta (albeit razor-thin) gave the Democrats the brass ring to dominate the national legislative agenda for only a few years. And being such a narrow majority (50-50 split in the Senate and now just a seven-seat majority in the House of Representatives), they need all their members on board to get their social priorities across the finish line – but they have a problem.

Of these seven seats, six are held by an annoyingly small group of Progressives (aka “The Squad”). And these six are very happy to torpedo the entire Democratic agenda unless they can get their way – and their way is WAY out there.

Note: The Squad is made up of six Democratic members – Alexandria Ocasio-Cortez (New York), Ilhan Omar (Minnesota), Ayanna Pressley (Massachusetts), Rashida Tlaib (Michigan), Jamaal Bowman (New York), and Cori Bush (Missouri). All are willing to spoil the whole thing if their far-left Marxist demands (as outlined in the Green New Deal manifesto) are not included in the Democratic agenda.

How the Bomb was Defused?

This past weekend, the Senate ended all debates on the bipartisan $1 trillion infrastructure bill, meaning that the GOP will not filibuster. And not too surprisingly, Senate Minority Leader Mitch McConnel and 17 other Republicans joined all the Democrats in setting the stage for the spending bill’s final passage early this week.

If the Republicans did detonate their filibuster bomb for this week’s $1T infrastructure bill, then Democrats moderates like Joe Manchin and Krysten Sinema could then feel justified to succumb to progressive pressure and detonate their bomb to torpedo the filibuster itself. The results would undoubtedly be explosive!

But, by passing this spending bill as a bipartisan effort, the GOP may have defused the Dem’s rationale for doing away with the legislative filibuster. And if the filibuster lives, then that will deal a fatal blow to the Progressive’s dictates.

Why These Massive Spending Initiatives are a Blow For Progressives But a Boon for Liberals

There is a negotiating strategy that suggests that each party include “throw-away” items into the contract. This way, one side can give up those sacrificial items in the name of cooperation. And since the Democrats are driving the new spending budget, I suspect they will use Progressive’s priorities as their throwaways.

We will find an onslaught of the Congressional Liberal’s long-sought-after priorities in the follow-up $3.5T annual budget framework. We should see additional spending requests for free child care, universal pre-K, paid leave, free college tuition, extend household tax credits, increase healthcare subsidies, lower Medicare eligibility age, new polluter fees, and a bevy of climate change policies.

There will also be a good handful of the Far-Left Progressive demands in the early framework. There will be references to unrealistic Carbon-Neutral goals, mandatory social equality for the LGBTPQ community, and other unobtainable demands. These requests are the ransom price Pelosi had to pay The Squad, but will ultimately be negotiated out of the final bill (not ALL Democrats are far-left nuts). 

(Note 1: the framework passed this week is just the required first step in developing an inclusive Federal Budget for FY2022. First, it states a Senate-approved max spending ceiling ($3.4 trillion as strong-arm demanded by Pelosi and The Squad) plus a long list of instructions. The framework is then passed to the House to begin drafting the spending legislation. So even though the Senate approved the $3.5T framework Wednesday, there is NO Spending Bill yet!) 

(Note 2: President Trump’s 2021 Federal Budget request was $4.8T. So I think the goose/gander metaphor may apply.)

Loser – Progressive Agenda

The suggested $3.5T spending bill has no chance of passing with the fiscal conservative / moderate Democrats in both chambers. Many Dems have already stated resistance to the price tag. So in the spirit of sacrificial cooperation, many (all) of the egregious Progressive demands will be tossed. This will drop the spending request well below the $3 trillion mark and all will claim a victory. This way the Democrats can look as if they gave up a lot of their liberal priorities, where all they really did was to throw the Progressives under the bus.

Winner – Biden

The optics of passing the $1T Infrastructure Bill as bipartisan will be excellent for the Democrats. Newscasters from both sides of the political divide will hail this as a sign that bipartisanship is not dead and that government is not irreversibly broken. Bidens will be the big winner in this process as someone who insisted that the bill be bipartisan.

Batman: “Better put 5 cents in the meter.”
Robin: “No policeman’s going to give the Batmobile a ticket.”
Batman: “This money goes to building better roads. We all must do our part.”

– Batman and Robin (Movie: Batman the Movie 1966)

Winner – Progressibles

From a perspective, the Progressibles will also have a win. Even though they will not get the Marxist transformation that they were hoping for, they will be able to say, that it was pressure from The Squad that forced the Democrats to go bold – and they would be correct.

Mutual Assured Destruction

The Democrats under Senate Majority Leader Harry Reid voted in 2013 for the “nuclear option,” which eliminated the filibuster for the executive branch and judicial nominees. Then, four years later, in a tit-for-tat exchange, Republicans under Senate Majority Leader Mitch McConnell extended the policy to Supreme Court nominees to confirm Justice Neil Gorsuch, Brett Kavanaugh, and Amy Barrett. 

I do not think that the legislative filibuster was literally in any danger. The Senate will likely pass control to the GOP in 2023, and the Dems do not want to lose the capability to filibuster Conservative’s priorities. Besides, I do not believe Leader Schumer wants to be mentioned in the same paragraph as Harry Reid and Nancy Pelosi as the people who started/exacerbated the current political ranker.

Of what use is a dream,
if not a blueprint for courageous action?

— Bruce Wayne (Movie: “Batman: the Movie”)

Other Posts from OptionsTradesByDamocles

This Week’s Market Sentiment

This Market Sentiment Section is typically completed by midday Monday morning. By the time this journal is published, it will be a week old.

(As of 07/18/2021)

In this section, I review five indicators: VIX, Put/Call Ratio, S&P 500, Consumer Sentiment Index, and Geopolitical events that could affect the market’s direction. I will use these indicators to help guide my trading decisions for this week.

Each of my five indicators will “vote” on a DEFCON (Damocles Options Trading Readiness Signal) level, exclusive to that indicator. Then, In the final sub-section “My sentiment for this coming week” below, I’ll compile the votes into a DEFCON level for the week.

Geopolitical Tree-Shakers (GTS):

Geopolitical events can be breaking news, political machinations, Federal Reserve musings, or even Twitter Trends. They are events that can abruptly change the dynamics of the current markets.

GTS is like a lit fuse to a bomb. The fuse can be fast or slow, and the bomb can easily be a dud. But I need to watch this closely as an indicator. The GTS can significantly disrupt all the other indicators at the drop of a hat.

• July’s non-farm job’s report this past Friday blew away expectations and alowed fledgiling markets to close the week positive
• Corpate America continue to report strong earnings but are warning on the furure affects of inflation
• Raising inflation is stoking fear that the Feds will consiter rasing Interest Rates sooner than projected
• The $1 Trillion Infrastruture bill is about to pass the Senate
• Delta varient is darkening our economic outlook
• Biden extends the pause on Student Loan repayment

The unemployment benefits provided by the Feds are keeping many eligible workers at home (receiving more money by staying on unemployment). This has created a labor shortage around the country that is keeping restaurant lobbies closed and reduced hours for shops. To address this shortage, many businesses are looking to boost starting wages to entice applicants. This is nothing more than a clever way for the Progressibles in Washington to up the national minimum wage without having to push a vote and take the political hit (a tactical win for AOC and followers). The forced raise in labor cost across the supply chain will exacerbate inflation and keep pressure on the Stock Markets.

The inevitable passing of the bipartisan $1 Trillion Infrastructure Bill will set the stage for the hugely partisan $3.5 Trillion spending bill by reconciliation.

Pausing the repayment requirements for Student Loans is harming those who have the debt.

Inflation is the keyword for this week’s GTS. Washington politics is not working to meditate the effects it will have on Middle America with rising costs on our everyday consumables. Instead, Washington is working hard to pass as much of the Green New Deal that they can get away with. (Note, I believe this is more of a desperate attempt by the Progressibles knowing that they will lose control of Congress in 2022 and most all of this spending bill will be reversed.)

GTS votes a DEFCON 3

VIX: Broad Market Volatility

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 one-month forward-looking volatility, 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. Since the intrinsic nature of the Stock Market is to move up, a VIX close to 15% or below will have an innate tendency to rise.

The 1-month Regression Channel for the VIX trajectory improved significantly from last week. Seems like the Marketeers let out a collective breath since the final Federal jobs numbers for July.

The VIX ended last week at 16.2%, down from 18.2% the week before. But the 9-Day SMA still remains above the 50-Day SMA showing that the latest drop is not that long.

The current VIX plummeted below both the 9-Day and 50-Day signaling that August may be a less scary month than thought.

Even though the VIX trajectory is still bearish, the significant drop from the beginning of the last week may be a good indicator that the Marketeers are feeling better about the Market’s prospects.

VIX votes a DEFCON 4

Put/Call Ratio:

Put Options are frequently used as protection 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.

The Put/Call Ratio has seen some crazy swings over the past four weeks and remained chiefly above the 0.5 line. The Marketeers continue to show a moderate degree of indecision (increased amplitude).

The 9-Day SMA continues above the 0.5 line, while the 50-Day SMA continues to track just below 0.5. This indicator is agreeing with the GTS that there are general market concerns.

Put/Call Ration votes a DEFCON 3

Consumer Sentiment Index (CSI):

I’m searching for a new Consumer Sentiment Index (CSI) chart as provided by the University of Michigan.

A low CSI index 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 CSI edged slightly upward towards the end of July, showing slight improvement from the mid-July preliminary numbers. But still remains marketability down from last month. This signals that most of us do not feel we are making any headway with the recovery.

CSI votes a DEFCON 3

Market Indexes:

DOW (DJX) = 35,209 – Up 0.8% from 34,935 last week. (4 week deviation: 262 down from 272 last week)
S&P 500 (SPX) = 4,437 – Up 1.0% from 4,395 last week. (4 week deviation: 41.11 flat from 38.5 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.

Market Thrashing

4-Week Thrashing of DJX = +/- 262 points or 0.7% of the market’s volume is down slightly from 0.8% last week.
4-Week Thrashing of SPX = +/- 41.11 points or 0.9% of the market’s volume is flat from 0.9% last week.
(The Market Thrashing is now below 1.0%. This might indicate a steady-state market.)

Just looking at the Market’s performance, the four-month trend is strongly bullish, the four-week trajectory is strongly bullish, and overall Market thrashing is low. All of this signals a motivated market to stay the current course.

But the Marketeers appears to have a monthly tantrum that sends the Markets into adjustment territory. These drops appear when the Feds are close to reporting employment of inflation data. I’m reading this Market Index section as mostly all good, but there is some stuff that is nagging at the Marketeers.

Market Index votes a DEFCON 4

My sentiment for this coming week:

Of the five indicators:

• The GTS suggests that there are some sustainable issues on the horizon – BOO!
• The VIX improved but remains above 15% – YAWN!
• The P/C Ratio shows a reaction that may continue to spill over to the comming weeks – BOO!
• The CSI shows a consumer base not getting excited about our economic future – BOO!
• The Market Movement continue to defiantly inch bullish – YEAH!

There is a strong consensus toward the “BOOs” this week. But I do have a positive outlook that the BOOS will not last for eight weeks, and will not be “THAT” severe.

Trading Readiness Level for this week

DEFCON = 3

This week, I will focus on:

This week begins with a better outlook (barely) than last week, but still at a DEFCON 3 level. So instead of recommending one 20-25 Strike-Width Spread, I’m going to suggest two 15 Strike-Width Spreads for more premium. And instead of suggesting a deep 85% P-OTM, I’ll go a little lighter to 83%.

• Two 15 Strike-Wide Vertical Put Spreads < $3K risk) – as the Markets see fit
• Spread term of 8-weeks or less
• Probability of OTM > 83%

Profit and Loss Statement

(As of 08/13/2021)

Balance Sheet

Progress Graph

(Note1: the negative weekly results for weeks 4, 8, 12, 17, 21, 25, and 30 are when I withdrew $300 from the Trading Account for my paycheck.)

My Performance vs. SPY

Hypothetically, instead of depositing $16,000 in my Options Trading Account, could I have done better if I bought $16,000 of the ETF/SPY instead?

Schedule for this Week

Goals for this week: (08/09/2021 – 08/13/2021) (Week #32)

• Document lessons learned or new thoughts
• Open one or two wide-strike spread
• Update Trading Log as trades occurs

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: Oct 1 (6-8 weeks)
    Note: If there are no Options Chains published for the 8-week expiration, then use the next Options Chain down from 8-weeks (7-weeks, 6-weeks). Beyond 4-week expirations, if only the monthly chains are available to trade.
• 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.

This Week’s Trade Activity

(As of 08/13/2021)

Spread Count Summary:

Current Dollars at Risk:

Vertical Spreads Opened This Week

(08/09/2021 – 08/13/2021)

SPY: 405p/390p  – Open 08/10/21 – Expires 09/30/21 – Max Gain = $96.00 – Open Price = $443.20
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=84.3%, Headroom=-8.6%, Max Loss=$1,404, AROR=48.4%

Entry Rules for Vertical Bull Put Credit Spreads:

• Current maximum dollars at risk < $16,000? Yes ($13,112)
• Max dollar at risk this week < $3,000? Yes ($1,404)
• Max time to have any dollars at risk < 8 weeks (<56 days)? Yes (51 days)
• Long-term trend (four months) bullish? Yes (see chart)
• Short-term trajectory of the underlying bullish? Yes (see chart)
• Put/Call Ratio < 1, (or falling if it is > 1)? Yes (1.0 down from 1.7)
• Current price above 9-Day SMA?: Yes (see chart)
• 9-Day SMA above 50-Day SMA?: Yes (see chart)
• Short-strike < 1 SD below the current price? Yes (1SD=$416.42)
• Short-strikes Prob-OTM > 83%? Yes (84.3%)
• Short-Strike price below the trend channel at expiration?: Yes (see chart)
• Current price within the bottom 1/2 of Trend Channel?: No (see chart)
• Strike Width minimum (>= 15)? Yes (15 strike width)

SPY: 415p/390p  – Open 08/12/21 – Expires 09/24/21 – Max Gain = $70.00 – Open Price = $442.89
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.6%, Headroom=-7.4%, Max Loss=$930, AROR=63.0%

Entry Rules for Vertical Bull Put Credit Spreads:

• Current maximum dollars at risk < $16,000? Yes ($14,042)
• Max dollar at risk this week < $3,000? Yes ($2,334)
• Max time to have any dollars at risk < 8 weeks (<56 days)? Yes (43 days)
• Long-term trend (four months) bullish? Yes (see chart)
• Short-term trajectory of the underlying bullish? Yes (see chart)
• Put/Call Ratio < 1, (or falling if it is > 1)? Yes (1.4 down from 1.7)
• Current price above 9-Day SMA?: Yes (see chart)
• 9-Day SMA above 50-Day SMA?: Yes (see chart)
• Short-strike < 1 SD below the current price? Yes (1SD=$420.78)
• Short-strikes Prob-OTM > 83%? Yes (84.6%)
• Short-Strike price below the trend channel at expiration?: Yes (see chart)
• Current price within the bottom 1/2 of Trend Channel?: No (see chart)
• Strike Width minimum (>= 15)? No (10 strike width)

Note: As I opened this new position, the maximum dollars available to risk was $950 (this was opened on Thursday but tomorrow I have two Spreads expiring worthlessly). So the Strike Width was limited to 10.

Vertical Spreads Currently Cooking

(As of 08/13/2021)

SPY: 400p/380p  – Open 07/29/21 – Expires 09/17/21 – Max Gain = $1.11 – Open Price = $441.40
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=85.7%, Headroom=-9.4%, Max Loss=$1,889, AROR=42.5%
Now: Prob. OTM=90.7%, Headroom=-9.8%

QQQ: 340p/325p  – Open 08/05/21 – Expires 09/10/21 – Max Gain = $82.00 – Open Price = $368.11
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=85.1%, Headroom=-7.6%, Max Loss=$1,418, AROR=59.6%
Now: Prob. OTM=86.1%, Headroom=-7.2%

QQQ: 330p/315p  – Open 07/15/21 – Expires 08/27/21 – Max Gain = $102.00 – Open Price = $362.23
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.7%, Headroom=-8.9%, Max Loss=$1,398, AROR =61.3%
Now: Prob. OTM=95.5%, Headroom=-10.0%

SPY: 410p/395p  – Open 07/13/21 – Expires 08/27/21 – Max Gain = $109.00 – Open Price = $437.47
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=81.2%, Headroom=-6.3%, Max Loss=$1,391, AROR=63.0%
Now: Prob. OTM=95.2%, Headroom=-7.5%

IWM: 205p/185p  – Open 07/09/21 – Expires 08/27/21 – Max Gain = $135.00 – Open Price = $225.54
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=81.2%, Headroom=-9.1%, Max Loss=$1,865.00, AROR =53.5%
Now: Prob. OTM=90.8%, Headroom=-7.7%

DIA: 325p/320p  – Open 07/07/21 – Expires 08/20/21 – Max Gain = $82.00 – Open Price = $346.97
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=82.5%, Headroom=-6.3%, Max Loss=$918.00, AROR =72.3%
Now: Prob. OTM=98.4%, Headroom=-8.2%

IWM: 205p/195p  – Open 07/02/21 – Expires 08/20/21 – Max Gain = $56.00 – Open Price = $229.36
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=86.2%, Headroom=-10.6%, Max Loss=$944, AROR =43.4%
Now: Prob. OTM=96.2%, Headroom=-7.7%

DIA: 325p/310p  – Open 07/07/21 – Expires 08/20/21 – Max Gain = $70.00 – Open Price = $344.22
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=84.0%, Headroom=-7.0%, Max Loss=$930, AROR =53.1%, 52d Dev = $3.20
Now: Prob. OTM=98.4%, Headroom=-8.2%

SPY: 400p/390p  – Open 06/29/21 – Expires 08/20/21 – Max Gain = $74.00 – Open Price = $428.20
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=81.9%, Headroom=-6.6%, Max Loss=$926, AROR =55.3%, 52d Dev = $5.00
Now: Prob. OTM=98.8%, Headroom=-9.8%

Vertical Spreads Closed This Week

(As of 08/13/2021)

SPY: 410p/390p  – Open 07/21/21 – Expires 08/13/21 – Max Gain = $113.00 – Open Price = $433.20
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=83.0%, Headroom=-5.3%, Max Loss=$1,887, AROR =94.2%
At Close: Prob. OTM=99.8%, Head Room=-7.6%, AROR= 94.2%

Cost to open: $1.13 premium collected * 100 shares = $113.00
Cost to close: $0.00 premium paid * 100 shares = $0.00 (expire worthlessly)
Net Profit= $113.00 to open – $0.00 to close – $1.00 fees = $112.00
AROR= ($112.00 / 23 days in play) * 365 / $1,887.00= 94.2%

QQQ: 340p/320p  – Open 07/22/21 – Expires 08/13/21 – Max Gain = $84.00 – Open Price = $363.15
(Vertical Bull Put Credit Spread)
At Open: Prob. OTM=85.8%, Headroom=-6.3%, Max Loss=$1,916, AROR =71.9%
At Close: Prob. OTM=99.3%, Head Room=-7.3%, AROR= 71.9%

Cost to open: $0.84 premium collected * 100 shares = $84.00
Cost to close: $0.00 premium paid * 100 shares = $0.00 (expire worthlessly)
Net Profit= $84.00 to open – $0.00 to close – $1.00 fees = $83.00
AROR= ($83.00 / 22 days in play) * 365 / $1,916.00= 71.9%

Conclusion

Can Options Trading be considered a Home Business? Can I make money at home by selling Vertical Options Spreads? These are questions that I am trying to answer for myself.

Three years ago, I set out on a task to see if I can make a retirement income from home by trading Stock Options. I began with NO knowledge of Options mechanics and only $8,000 to risk. And because I learn best when I write down, I have documented every step of the way (every bonehead mistake, process epiphanies, interconnecting events, externalities, and so on).

Disclaimer

Even though I have tried to make it clear that this blog is my personal trading journal, 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.”