Cashing Out Of FXE
Biden’s confirmation of Janet Yellen as the Fed chairwoman 2.0 pretty much sealed the fate of the U.S. Dollar and I expect it to be renamed the ‘U.S. Weimar’ just before its replacement by monopoly money which it appears to be more resilient against haphazard inflation. But to be honest a crashing Dollar is par for the course for a nation that is incapable of holding a presidential election without certified results over one month later.
The 90 mark is straight in sight but given the current trend we could quickly see ourselves at the 85 mark. Not a fun prospect for this expat, I gotta tell ya.
Everyone seems to love love love a weak Dollar – and tell their friends about it at parties – until they realize that selling your house for double the purchase price doesn’t really matter as all the other houses you would want to buy have doubled in price as well.
So unless you still are in the business of flipping houses for a living the ‘profit’ you may claim is an illusion as the purchasing power of the currency it’s denominated in is systematically being destroyed.
Here’s the Euro which is now going gangbusters as everyone and their uncle are expecting to the Euro to become the next reserve currency.
Which is tantamount to jumping from the fire into the frying pan but I have long given up on trying to make sense out of tidal waves in investor sentiment.
Incidentally this is the chart I emailed everyone on Tuesday in a special update. A few subs wrote me love letters over the past two days, so I guess I earned my keep for the remainder of the month 😉
Anyway, I should not complain about the Dollar as I was well hedged against this very scenario via my notorious hammock options strategy (i.e. a double backratio but its composition varies based on IV). A course on that is in the works.
That’s a 4R return and I am happily cashing out today while the getting is still good. Could it pop much higher? Sure it could but over the years I learned when to cash in my chips and call it a day.
Equities meanwhile – denominated in Dollars of course – are pumping higher into new all time highs. I would call it the ‘Biden Rally’ but since the outcome has not yet been officially certified yet let’s stick with ‘post election rally’ instead.
What continues to irk me however is that the ‘monsters of tech’ are NOT participating. And if you consider that tech, and the symbols in this composite symbol in particular, has been driving the entire 2020 bull market, then it casts some doubts on whether this rally has legs.
And then of course there’s the VX futures curve which remains in contango as shown last Wednesday.
In that post I made a point about falling IV and I would be amiss to not point out that we are still holding steady at lows we have not seen since early this year when all the COVID shenanigans began.
I consider this an awesome opportunity for placing medium term VIX back ratio spreads and if you’re a Gold or Zero sub then you already know why as it was explained in detail on Wednesday.
Time To Start Using Your Elbows!
Speaking of trading options – there is still time to snag up my brand spanking new ‘Weekly Returns With Butterflies’ course for a handful of peanuts before my special offer expires next Monday.
Why should you buy it?
Most option traders already know how to create and place a butterfly spread as modern platforms like ThinkOrSwim make the basic mechanics fairly easy.
What the majority of traders however do NOT know, and where most of the educational material you find on the topic fails to deliver, is how to MAXIMIZE your edge by constructing a fly that has high odds of banking any coin come expiration day.
So once again I dug deep and started producing a course that not only teaches you the basics of how to analyze and place a butterfly. Much more importantly it introduces you to a comprehensive systemic approach for trading butterflies successfully while conveying important fundamentals related to trading options that will accompany you for the remainder of your trading career.
So What’s In The Box?
In the first chapter of this class, I cover all of the core fundamentals of how to properly construct and analyze a butterfly spread, how to deconstruct it into its core components (i.e. vertical spreads), and how to assess your risk and profit basis. If you have not bought Options 201, don’t worry as I spend plenty of time in covering the basics.
Although you may have traded options and perhaps even butterflies for many years already, odds have it that you have never been taught basic probability calculations and spread tactics that form the basis of successful options trading. This course quickly remedies all of that and then dives deep into specific trading criteria I have developed over the course of many years.
To that end the remaining chapters of this series focus on why you would trade a butterfly in the first place and how to do it profitably via a clearly defined edge on a weekly basis. Many of the techniques covered in this course, aren’t even taught anymore, as most of the contemporary material merely focuses on the structure and theory of butterflies but not on actually how to make money trading them.
Until now! This is your opportunity to learn how to trade butterflies ‘the right way’ and in the process elevate your trading career as a whole to the next level. Even if you are an experienced options trader I guarantee you that by the end of this course you will have learned something new and valuable that will aid your daily trading reality for years to come.
Probability Of Profitability (POP)
Once you understand the basics of trading butterflies from a ‘probability of profitability’ perspective, and of course assuming you can get your head trash out of the way, this course will completely change the game for you.
And I’m not just pulling that out of my rear side – many years ago when I was taught these same concepts I never looked at the market the same way ever again. But at the same time none of the material covered is either brain surgery or rocket science.
Successful option trading basically boils down to this:
- Knowing not only the probability of success when sculpting your spreads but more importantly assessing your ‘probability of profitability’ which in fact defines your actual edge. This is a crucial concept you rarely hear about outside of professional trading circles and in this course I have devoted an entire chapter to this topic alone.
- Knowing when to get in, how to get in, and when and how to get out.
- Maximizing #1 and #2 through by selecting the proper spreads via clearly defined criteria.
Expected Move And Butterflies – A Perfect Match
Options and by extension option spreads like butterflies have risk and probability baked directly into them by default. There is no difference between perceived risk and the premium you see in front of you. This is a reality missed by most option traders who seem perplexed by the flood of information emanating from their trading platforms.
In this course I address this important topic head on by explaining how weekly expected move (EM) can be leveraged effectively to maximize profitability on a long term basis. None of the material presented is based on opinions, academic theories, or form fitted back testing. Instead this course squarely focuses on statistics and hard earned knowledge gained by trading a live market on a daily basis.
Increased Market Efficiency
Since the introduction of additional weekly expirations in 2016 option markets have become extremely efficient and thus more predictable. Which makes trading options easier IF you know what you are doing, what to look for, and of course understand how price and risk are intimately correlated.
In this class, I cover a long laundry list of fundamental topics related to trading butterflies:
- Why ‘market manipulation’ is a myth but ‘market guidance’ is an integral part of our trading reality we can actually take advantage of. And I will show you how.
- How you may have been trading options for many years but probably have missed out on one of the most crucial concepts driving the options market – and by extension the equities market in the 21st century.
- How to leverage weekly ‘expected move’ and take advantage of the increased market efficiency perceived over the past five years, which can lead to potentially explosive returns.
- How to deconstruct a butterfly into its essential components and how to calculate max risk, max profit, as well as probability of success.
- Why you should mostly ignore risk graphs and how to instead more realistically project your butterfly’s earnings potential.
- Which option contracts to trade, and when to trade them.
- Why you should stay away from quarterly expirations and focus on weekly expirations instead.
- Where and when to properly place your butterfly to maximize your earnings potential.
- How to properly price your butterfly within a clearly defined cost basis.
- How to pick a direction but at the same time why directional bias does not really matter.
- Bullish vs. bearish butterflies and how to trade each of them with the proper options.
- Picking the right width for your butterfly and how.
- Why you may want to shift or widen your butterfly and when.
- How to adjust your butterfly to specific market cycles.
- Reduction in buying power vs. margin and why it matters.
- Proper position sizing specific to your portfolio.
- Butterfly exit criteria and how to choose the most effective timing when closing your trade.
- Avoiding dangers and keeping your account out of trouble.
- Last but not least, probability of profitability (POP) which is the true secret behind trading butterflies successfully.
Months of hard work culminated in the most comprehensive guide to trading butterfly spreads profitably you are going to find.
So get off the damn fence and buy it now!