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:


Model Portfolio Update

I think gold is ready for another leg up after reacting positively to Janet Yellen’s inane speech in Jackson Hole, Wyoming. Adding a 5% position in leveraged junior gold fund JNUG at $22.83 a share.

Reminder I am not a legal financial adviser according to the government, so I’m not actually saying anything or recommending anything and I’m warning anyone considering not to listen to anything I say about investment.

Model Portfolio Update

I’m selling the $190 call option position in Sarepta (SRPT) for a 60% gain. Check the model portfolio at the menu bar. It’s always easy to Monday morning quarterback and say we should have bought more, but high risk options are for small positions only. If you’re lucky you can get a big gain on a small sum, which is what we got here.

Gold Spikes Yet Again, Silver Breaks Through $21, Italian Banks in Freefall

Our model portfolio (just a game for legal reasons) is flying high. We will exit leveraged positions some time tomorrow on what looks to be something like an 80% gain in 3 weeks. I plan to convert it to unleveraged metals positions to catch any additional move but I expect the metals to go down for a few days next week. If they don’t we’ll still have regular positions in this fictional game.

There may be a big spike tomorrow morning at the bell since US traders are out of the picture today and had to watch from the sidelines. Futures traders can trade metals wherever they want 24 hours a day, but US equities traders who focus on gold stocks and ETF’s will have their first say tomorrow morning. Judging by comments I’ve read and the fact that gold is now the Yahoo Finance front feature article, it looks like retail dumb-money traders will pile in on Tuesday morning.

We will be selling right to them (in our fictional game for legal reasons), and hopefully pick our (game) leveraged positions back up when the retailers get too scared of the temporary draw down.

This is what I’ll be doing personally. Anyone who wants to follow, I do not recommend it and you do it at your own risk.

Italian banks are crashing today. The rickety financial fiat superstructure of the planet is shaking under the weight of its own printed paper.

Model Portfolio Home Run and Gold Update

I took the model portfolio to 10% leveraged positions on June 16 in gold and silver. They paid off this week. We will sell on the next big up day and put the money back into unleveraged positions and very battered very cheap post Brexit European bankster banks.

NUGT, the 3x leveraged gold miners fund, is up 31.5% since we bought it.

USLV, the 3x leveraged silver fund, is up 40%.

These funds are dangerous and shouldn’t be held for too long.

Disclosure for legal purposes: I own NUGT and USLV. And I am not recommending anyone do anything since the government says I am not a financial adviser.

As for gold, it has, for the first time since crashing in April 2013, broken through the 200 week moving average, and inflation isn’t even high yet. When inflation exceeds 5%, you will see the metals go up faster than you can imagine. Once inflation becomes obvious, we’ll see a quick trek to $5,000 or more, probably before 2020.

Model Portfolio Change, Watch CPI Numbers Today

The Fed is holding off on another rate hike, and that could be very embarrassing if the consumer price index rises faster than anticipated. The numbers will be released at 8:30am eastern, 3;30pm here. Analysts are anticipating a 0.2% rise in core CPI which is the index minus food and energy. If it rises by 0.4% or more, gold is going to go much higher quickly. I wrote about this at 247 Wall St. yesterday.

Here is the article.

I have always maintained that once inflation gets obvious, the Fed will have to start chasing inflation with higher and higher interest rates regardless of economic conditions. This is what happened in 1980 when Volcker jacked up the effective fed funds rate to 22%. That is impossible today because it would force a hard default on US Treasuries. That would be a bona fide bankruptcy. So instead the Fed will simply let inflation run away into hyperinflation because there is no other choice.

That is when gold will move higher than anyone has ever seen, faster than it did in 1980.

This will happen, guaranteed. Eventually. I don’t know if it will start tomorrow or 5 years from now, but I’m willing to risk 10% of the model portfolio on it. It’s time to use some leverage.

I’m adding a $5,000 position in the 3x leveraged gold miners fund NUGT, and $5,000 position in the 3x silver fund USLV.

I’m also adding another $500 on shorting the bond market with puts on TLT.

This is risky and could make me look like an idiot. We’ll see what happens. For legal reasons because Congress has made a law imposing on the freedom of speech, this is a game and I am not a financial adviser, and I am making no recommendations to anyone.

Check the model portfolio page at the menu bar for updated positions.

Model Portfolio Update

For anyone who has been following my trading game, the model portfolio is way up. See the model portfolio page on the menu bar. I closed the SPY call option position for a small loss. The contracts expired in the money, but not enough so, so we took a $480 loss. I added one contract of SRPT January 20, 2017 $50 CALL for $190. The big FDA decision on Eteplirsen is due in 10 days, and there is a chance it will be approved. If it is, that contract will become much more expensive.

Since everyone is focusing on options expiring next Friday since the FDA decision will be in by then, the longer dated calls are at a significant discount, so I bought one.

Total notional gains for open positions in the model so far are $19,000 flat plus realized gains from closed positions of $2,480, for 21.5% gains so far. Each individual position is as follows.

Portfolio began 9/21/15.

Open Positions As of January 5, 2016

$5,000 QQQ at $99.97/share – ADDED 1/20/2016, current gain $341.

$9,000 CVX at $76.97/share w/5% dividend – ADDED 1/20/2016, current gain $2,938.

$500 GLD JAN 2017 225 CALL  @ $0.13/contract  – current loss $154

$10,000 CORR at $25.80/share w/9% dividend – current loss $1,143

$10,000 CORR at $15/share with 17.7% dividend – ADDED 12/29/15 – current gain $5,220

$500 TLT JAN 2017 $95 PUT @ $3.00/contract – current loss $500

$30,000 GG at $13.40/share w/1.1% dividend – current gain $11,574

$10,000 POT at $17.80/share w/8.54% dividend – ADDED 12/29/15 current loss $1,033

$10,000 888.L at $2.72/share (183.5 pence) – ADDED 12/29/15 current gain $1,757

$190 SRPT Jan. 20, 2017 $50 CALL – ADDED 5/16/16

$17,330 CASH

Total notional gains $19,000 flat

Closed Positions

$20,000 CVX at $78/share w/5.5% dividend – SOLD 10/8/15 AT $89.72/SHARE FOR $23,000

$3,000 SPY APR 15 2016 203 CALL @ $5.95/contract – CLOSED 4/15/16 FOR $2,520

TOTAL As of May 16, 2015 – $121,480.

Total realized gain 2.48%, Total notional gains 19%.

Rounding down for commissions.

Additional information: This is a game, and I am making no recommendations.

Model Portfolio Change

After yesterday’s drop I have added a position to the model portfolio. $3,000 worth of SPY April 15 2016 calls at a strike of $203. Check the model portfolio page at the menu bar.

There is no reason for stocks to fall so hard now, as the money supply is expanding rapidly. This will be reversed in a few days, if not today and we should be able to sell the calls for a quick profit sometime in late January or early February.

The reason I picked the $203 strike is that it has the least open interest in near the money contracts, meaning the lowest amount of people trading it. That generally gives it a discount over other strikes as the demand is lowest.

I always go out a little farther than I plan to sell them in case my timing is off. It’s worth it to pay the extra time premium rather than rely on impeccable timing which I almost never have.