Trading Alert – Calling a Stock Market Crash Between End of August, End of September

I explain why here.

Read that first.

Yesterday I entered the following positions in order to prepare:

4 contracts XBI Sept. 15, 2017 61 PUT, at $0.19 a contract, total cost $76

17 contracts XBI Sept. 15, 2017 62 PUT, at $0.21 a contract, total cost $425

From July 18th, 2015 (today) to the low on August 24th, 2015, XBI fell 33%.

I’m expecting something similar to happen again. My guess is August 27th but it could be any time before October.

If what happened then plays out again, the target low on XBI will be $52.50.

At that price, the 61 PUTs will be worth $8.50. The 62 PUTs will be worth $9.50.

Total risk = $501

Maximum gain on 61 PUT: $3,324

Maximum gain on 62 PUT: $18,801

XBI on August 24th, 2015:

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7 thoughts on “Trading Alert – Calling a Stock Market Crash Between End of August, End of September

  1. Followed your heads up and bought tvix at 16. Already up almost 50 percent..and it is not the end of august yet. Wonder when to exit the position – before end of september for sure.

      • Why? according to the same updates h6, the quarterly growth rate in m2 right now is almost a rounding error around 0 (0.15% growth).. you yourself predict vix shooting to 40 between end of August and September. I think I will hold on to the position for now, as the current scenario appears closer to your worse case scenario than the best case one. At worst I will have to sell with a loss, I’m not betting the farm here.

      • It’s at 1.5%, not 0.15%. TVIX and UVXY are the most dangerous ETFs available. I do predict VIX shooting to 40 but that doesn’t mean I’m right and it doesn’t guarantee anything! I suggest one of two things from here. If you want to hold onto these ETFs, pick a hard sell point scale. Meaning, if your target is 100% gains, then when you get to 50% sell a quarter of your position. 75% sell another quarter. 100% sell another quarter and so on until you zero out. Don’t wait for your exact target to be met only to sell everything then, because if it isn’t hit you will lose your profits. You need to take this trade knowing you will not hit the maximum gains.

        Second option is use options like I am. They require much less capital for greater gain potential. I’m only risking $501 right now, and will add another $500 or so this coming week, probably. So my maximum loss is $1,000, maximum gains around $44,000. If I can get out of the trade winning $10,000 I’ll be very happy.

  2. I have been following your articles on seekingalpha.com in regards to the possible crash this year with much interest. I also subscribe to Robert Wenzel’s EPJ Daily Alert and he follows M2 in much the same way you do. Like you I am convinced a strong correction will happen this year, though I’m of the opinion it could happen as late as October. For my shorting strategy I am going long Vix. I bought 50 Oct 17 Vix 20 calls at $0.70 for a total of $3500. In 2015 Vix spiked up close to 50. If I can catch it at 40 that’s at least $100k. Good luck to you sir!

    • Jesse thanks for the comment. Your strategy won’t work. VIX options are not exerciseable so you won’t be able to sell them at their intrinsic value when you close the position. Premiums shrink heavily the higher the VIX goes in anticipation that it will soon fall. Best to use options that are exerciseable and therefore have intrinsic value. I’m using XBI.

      • Thanks for the heads up. I’ll adjust my strategy accordingly. I’ll probably go with tech puts instead.

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