BY HANS ALBRECHT
November 22, 2024
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It’s your intrepid income trader Hans. What a week it was again. We knew that markets would be on high alert for the Nvidia earnings results and I think they got what they needed. Remember how I said markets like their porridge warm? Nvidia was meh and that’s just fine. This market wants to go higher and that might have been just right to get some of those flows coming in again. But I did say that Nvidia wasn’t too big of an issue because the broadening of this market was already well under way.
As we talked about on our OP shows, the lead these days is coming from non-Magnificent 7 companies. Cyclical versus secular. Bricks and mortar versus bits and bites. Old school touchy feely stuff – how fascinating!
Is it going to be smooth sailing? Well, I like the idea of a grind up with volatility compressing lower – ie the VIX heading into the 13s or even 12s by the holidays. I am a little concerned that I’m seeing a lot of parabolas on charts, however (massive ski-slope break-outs). There is exuberance in many names, and not only in the Bitcoin complex of proxies.
On that note, we’ve been trading MSTR and made 100% on risk on a broken wing butterfly that we closed yesterday. The interesting thing is that MSTR went $80 in the WRONG direction before finally succumbing to gravity. That gave us our out. But that’s how you can play the insanity – with very limited risk, which gives you the patience to wait for your conviction to play out.
Next week is US Thanksgiving but we do have a number of data points to watch. Consumer confidence on Tuesday morning, with Fed minutes later in the day. Jobless claims on Wednesday with some GDP and PCE data for the Fed to mull over before tucking into some turkey. These are for sure going to be important but with the day off Thursday I’m not super sure they will be particularly market moving. So I’ve been picking up VIX puts for the vol crush and it’s working.
Our trade closes continued to be good this week. In the income sleeve we are closing cash-secured puts and credit spreads to bank some gains. An upside iron condor in SPY should capture both the upward grind AND a drop in volatility. Pay attention dear reader because that’s how you line up your option Greeks. Some positive Delta, some Theta decay, and with a side helping of short Vega to go with your Thursday feast. Don’t you love making money WHILE you scarf down your second helping of apple pie on a holiday? Yes, the right Greeks can make you money while you eat and sleep. Make sure you don’t miss these letters if you want to know about all the great stuff I have planned for you.
Our Domino’s Pizza position continues to work. What’s better than pizza? Pizza with Warren Buffet’s blessing that's what (he bought some DPZ). We closed Cameco puts for a nice win and closed out our CMG for a win too. It’s starting to act well again though so I’m eying some more premium sales. In the burgers and burritos race McDonald’s has been winning in spite of health concerns. But I think CMG has some catching up to do. Wonder if they have turkey burritos over the next week. Probably not. Maybe it’s for the best.
Until next time….may the income be with you.
Hans
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