Send In The Clowns

A few weeks ago some perma-bearish clown showed up and began to mix it up in our comment section. It didn’t take him very long to get squashed by the mighty ban hammer as he immediately began to challenge and offend half of the posters here, including yours truly. I don’t usually comment on trolls or clowns but this particular incident turned out to be highly educational and thus should serve as a stark warning to the rest of us: Never ever bet the farm on a lottery ticket.

Now since I was brought up in a more conservative/sane century I elected to blur out the guy’s disqus ID. We Germans may be famous for inventing the word ‘Schadenfreude’ but we do take losing your life savings by sheer idiocy or mental disability very seriously.

That said, here are two of the highlights, both posted on February 8th:

He quotes my post and insinuates that ‘trop traders’ have been building short positions in equities and are massively long implied volatility (i.e. the VIX and perhaps various option based vega plays).

Well, the E-Mini held up just fine that day and the next day and the next day, and many after that. In fact it relentlessly kept on steaming higher (fading an onslaught of bearish clickbait) and managed to gain almost exactly 100 ES handles as of this morning.

Alright, this is the money shot. Señor Payaso claimed that he was holding nearly 5,500 weekly 29 VIX calls, which happen to expire tomorrow. Not sure who up-voted that comment but it for sure wasn’t me.

Now let’s see how his option campaign has fared. I am giving him the benefit of the doubt here by setting the entry date to February 8th – if he bought them earlier or accumulated on the way up then that would have amplified his losses.

The ask on the 29 weekly calls were $20 and not considering commission he paid $110,000 for the entire position (not sure why the panel claims $55,000). And unless equities unexpectedly fall off the plate today or tomorrow and the VIX touches 29+ odds are his calls are going to expire worthless.

Lesson Learned

A lottery ticket is just that – a Hail Mary pass at some six sigma event that has extremely low odds of occurring. We’ve have all traded them and the few that actually panned out ended up glorious.

But don’t back up the truck and buy $100k+ worth of lottery tickets – or you will end up getting crushed just like this guy.

On the plus side he just won the coveted ‘beartard of the month award’. Congratulations are in order!

Alright, so where are we in equities this morning? With Mole kicking a damn tree as he succeeded to have his trail taken out (with profits naturally) by a mere tick or two. Best laid out plans and all – I really hope some of you guys were luckier and are still holding.

BUT we may just get a chance at a reload. See that huge volume chasm just above at at around ES 2820? I would be very surprised if there wasn’t some sort of shake out attempt and with a bit of luck and duct tape we may see a correction back down to ES 2750 as this run is getting a bit long in the tooth.

The Dollar has been gyrating around one the past few weeks and is now back at its 100-day SMA. Which is starting to flatten, and may roll over if old bucky is unable to get out of the gate here.

My new gold campaign is still alive but my ISL remains as we have not seen sufficient upside just yet.

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