If It’s Broke, Fix It!

Yo Pit Crazies,


I’m on vacation, such as it is. 


We drove to North Carolina from Maine, and my car gave me fits the entire way.


Nothing like driving over the Chesapeake Bay Bridge thinking your car is going to break down.


White knuckles … but we survived.


Made me think about broken cars and broken trades.


If it’s broken, you gotta fix it!


Mark will talk about the best broken product ever, the UVXY ETF and reveal three incredible trades — on Tuesday.


I will be playing golf.


Mending Fences


I am managing the The Power Moves Portfolio with Frank Gregory and we have a couple of broken trades.


While the dollar amounts are small, I will wrap them up because we have three weeks to go to expiration.


The most important thing about a broken trade is to …


Live to fight another day!


No trade should take you out or blow up your account. If the trade sniffs that number, it’s way too big.


I like to keep my trade size around 1-3% of account size while finding excellent plays to put on for big profits.


In The Rundown below I will outline fixing a couple of positions.


Realistically, just getting back to even is a win when things go bad.


I define a broken trade as the initial outlook being totally wrong. But the best time to plan for the worst is before entering the trade …


I have found after teaching option trading for 30 years that open trades do not lend to good decision-making when things go off the rails


The Lesson: Live to fight — or drive your car across a bridge — another day.


The Rundown


Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Radar to find order flow in active names.

    • Mark has some mojo rolling and with the tweaks he made to the Robinhood Radar. He now has five wins in six and closed two dingers on Friday.

      • UVXY is the gift that keeps on giving. June 04 26.5-puts were bought for $1.60 and closed for $3.
      • Blackberry (Ticker: BB) June 04 10-strike calls were closed for a 160% gain in less than 24 hours.


The Power Moves Portfolio:
Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise. We are aiming for positive theta trades and using that income to buy calls is the big growth opportunity.

Ford (Ticker: F) pulled back a bit and we will take the money if we don’t see a rally next week. The strangle was up around 20% as of the close.

General Electric (Ticker: GE) is a play on green energy. I own two GE Sept. 17 14-strike calls for a credit.

Cleveland-Cliffs (Ticker: CLF) broke out and way above the strike in my spread, so I took the $100 gain and bought a midterm call, one CLF July 16 21-strike call for $1.61. Looking for a double in this call to close.

Our Vale S.A. (Ticker: VALE) position is down a bit in the five VALE June 18 22-strike calls we own, but it is closing again on even. We sold all the puts in here for a 100% return per put. The loss in this position has closed and we would squeak out for a $1 close on the calls for a break-even and move on. We’re in repair mode on this position, so even is fine and I will move on.

We own four Taiwan Semiconductor (Ticker: TSM) June 18 120-strike calls for $3.10 and one TSM June 18 100-strike put for $1.95. We’ve taken in $470 against them via TSM calls we sold and QQQ put spreads we closed. The calls are back to $1.75, but time is ticking. At this point, the position is broken as TSM has made three moves up and down from $108 to $117. The 120-strike calls need a breakout and we’re not getting one, so that’s why we’ll hit the exit for even.

Palantir (Ticker: PLTR) stock briefly hit $24.75 on Friday as the meme stocks got hot again. We are back to even on the position, and if we get a move above $25, we will take the win and move on since this one is in repair mode. Our initial strangle lost small and we tried to generate some income via put ratio spreads, but PLTR went from $24 to $18 in about 2 days. With the long stock and puts, we have time to let things work out but still want to exit and redeploy the dollars.


Volatility Edge/Volatility Trading Club:

The Option Pit VIX Light is RED.  As in, “Down goes VIX!” We also have some BIG news coming soon on the UVXY reverse split. So get in on that.


      • Vol Edge closed trade No. 92 UVXY June 04 37-strike puts for 63% profit.  There is a theme here and Mark will be happy to talk on Tuesday.
      • No real change to VTC positions, as both are up and ready for a move either way in VIX. With three weeks to go with each position is up better than 10%.


Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!


To Your Trading Success,



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