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New information coming out of the MTF is suggesting that the current trade we have on is not ideal for the new track. Therefore, we are going to adjust and reconstruct the trade a bit to a balanced butterfly.
All in November, we have an 80/82/83 butterfly, 7 spreads. Make it into a 79/81/83 butterfly. So: buy 14 $82 calls, sell 14 $81 calls... then sell the $80 calls, and buy 7 $79 calls. This creates $20 of slippage in profitability, but aligns the thesis better.
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We have held this $SPX trade since March, and it is the most successful trade in this newsletter's short history. In fact, it has wielded not only a considerable percentage from the trade itself, but there have been tranches that have added to the equity return.
Today, I am closing it out. I sold the SPX vertical at $10.45, a 221.5% return on this original trade not including the tranches and hedges that were done along the way. Here's why: Avi is talking about a drop to 2830 being a pivotal moment. DaybyDay has a drop to 2790 in the near future. Hadik has a drop to 2800. Further, there are questions among the trusted analysts about this bull market being over, with a multi-month top being put in place. There may be a chance we will see a leg higher, but the long term portion of the equities trade is over. I may play some shorter term equities trades in the future, while I wait for confirmation that the long term bear market trade has begun. I have closed the XLU trade at $.18 debit. This was a very low maintenance, high probability trade. XLU has a very high Variance Risk Premium, so these kinds of trades are perfect for this vehicle.
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The WizardJason DeLorenzo Archives
January 2022
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