Buckle Up! Market Winds Are Shaking the Tree

March 5, 2021

What a wild ride in stocks this week!

As you can see, we made it down to Florida.

I underestimated how long of a drive it actually is from Chicago, which ended up being around 25 hours.

It was exhausting and still trying to get back on track.

We were able to sidestep the draw down last week, but this week we weren’t so fortunate.

After Monday’s strong session, stocks have been weak, but found their footing after retesting the lows this morning.

The recent volatility is a market structure shift due to the 10-year treasury yield spiking higher.

This morning the yield shot above 1.60%, but has eased back down to 1.55%.

The Fed has been trying to tame this lion, but I don’t know how long they can hold it back.

But until further notice, we are still in a bull market, but we’ve shifted into what I refer to as bull volatile.

This volatility is normal, but it is shaking the trees and getting the weaker hands to sell.

Now, The CBOE Volatility Index (VIX), aka the “fear” index, is still above our key 15 levels, trading at 26.

As I predicted two weeks ago, we would see a sell off when it reverted back into that 20 level.

The good news is that when we see a spike in the VIX, it reverts back.

This is different than a slow swell in the VIX, which takes time and slowly creeps higher before a big sell-off.

Now let’s talk shop.

Portfolio Update

Last week, we closed three winning trades in a row!

This week, we got caught in some of the volatility

On Monday:

  • Buy-to-open the Boston Scientific Corp (NYSE: BSX) March 19, 2021, $40.50 call (BSX210319C00040500) up to $0.33 per contract or better, for the day.

On Wednesday:

  • Buy-to-open the iShares MSCI Brazil ETF (NYSE: EWZ) March 12, 2021, $30.50 put (EWZ210312P00030500) up to $1.10 per contract or better, for the day.

On Thursday:

  • Sell-To-Close the iShares MSCI Brazil ETF (NYSE: EWZ) March 12, 2021, $30.50 put (EWZ210312P00030500) at the market.
  • Sell-To-Close the iShares MSCI Brazil ETF (NYSE: EWZ) March 12, 2021, $30.50 put (EWZ210312P00030500) at the market.
  • Buy-To-Open the Schlumberger Limited (NYSE: SLB) May 21, 2021, $35 call (SLB210521C00035000) up to $0.90 per contract or better, for the day.

Right now, we’re holding:

  • Schlumberger Limited (NYSE: SLB) May 21, 2021, $35 call (SLB210521C00035000)

After-Action Report

This is our debriefing of every trade closed or expired to analyze what happened, why it happened and how it can be done better — like what the military uses after missions.

BP p.l.c. (NYSE: BP) June 18, 2021, $24 call (BP210618C00024000)

Date: February 16, 2021

Reason: Our system this buy alert after detecting a directional $6.3 Hot Money bet in the June expiration that shares will continue to move higher.

Outcome: 25% gain.

Notes: We executed this perfectly by letting the market come to us and exiting at our profit target.

World Wrestling Entertainment, Inc. (NYSE: WWE) March 19, 2021, $55 call

Date: February 17, 2021

Reason: Our monitor triggered this buy alert after detecting a directional $4.5 New Money bet in the February expiration, which expired on that Friday.

Outcome: 25% gain.

Notes: We entered into a position that expired the following week, which ended up working out for us. Share did spike the next day and did trigger our profit target, but I didn’t send out the official exit until I knew everyone could be filled. That was a few days later. Options move fast and why I keep a GTC profit order in the order book so I don’t miss the targets.

Mattel Inc. (NASDAQ: MAT) March 12, 2021, $19.50 call (MAT210305C00019500)

Date: February 22, 2021

Reason: Our monitor triggered this buy alert after detecting a directional $10.8 New Money bet shares will pop higher by that Friday.

Outcome: 25% gain.

Notes: We executed this perfectly by letting the market come to us and exiting at our profit target.

Boston Scientific Corp (NYSE: BSX) March 19, 2021, $40.50 call (BSX210319C00040500)

Date: March 01, 2021

Reason: Our monitor triggered this buy alert after detecting a directional $5.3 million Hot Money bet that shares will pop higher.

Outcome: 40% loss.

Notes: Even though this was a loss, we executed according to our system. Unfortunately, it looks like we got in a shakeout with prices roaring back higher, but that’s part of the game.

iShares MSCI Brazil ETF (NYSE: EWZ) March 12, 2021, $30.50 put (EWZ210312P00030500)

Date: March 03, 2021

Reason: Our monitor triggered this buy alert after detecting a 300% increase in puts traded looking for a sharp drop in share prices.

Outcome: 40% loss.

Notes: Minutes after issuing this alert, there was a surprise headline about Brazil’s president caving and buying vaccines from JNJ and Pfizer, which sent shares higher. I often avoid ETFs because there is so much noise, but the activity was too hard to ignore. This is a frustrating loss, but it’s part of the process.

That’s all for this week and it’s about time for me to have a margarita by the pool.

TGIF!

Have a great weekend and we'll have a new trade on Monday.

To your wealth, freedom, and options!

Joshua M. Belanger

Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%