MCD, META, and COIN trades are killing it in the community

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With Halloween around the corner I can’t help but feel that the VIX is currently a 12 dressed in a 20 costume!  VIX is now TRIPLE realized volatility, otherwise known as ACTUAL market movement.  So while the broader market is experiencing very little movement, fear gauges like the VIX are very high.  And rates volatility?  Even higher.  Bond volatility is about as high as we’ve even seen it ahead of an election.  Why?  Well, take your pick… pivotal election, pivotal FOMC meeting, and just maybe… pivotal amounts of debt.  

Since the Fed cut rates by 50 basis points we’ve seen rates going nowhere but up.  The 10 year yield has soared from 3.70 to 4.25 – an almost record move.  That is not a rates market that is on the same page as the Federal Reserve.  But this isn’t news to me.  As I’ve been saying for months, the risk is not that the economy slows or that employment rises, it’s that inflation begins to rear its ugly head again.  

Markets are stable this morning as GOOG didn’t disappoint.  That’s a good sign for the ad spend world and that is pushing META close to 600.  Our risk reversal trade from last week?  Almost a home run at this point.  In at $1.25, we took off half at $13.40 yesterday.  At 600-605 I will sell the remaining.  But my data is showing that Mag7 is still very underowned and I’m looking for further follow through as the year winds to a close.  

Leading Economic News Coming Out This Week

Yesterday’s consumer confidence numbers were MUCH stronger than expected.  While this is positive for growth in general it once again dismisses any hard landing talk.  The labor market remains in very good shape and in fact is improving.  But that also highlights my main concern which is that the Fed is stimulating an already strong economy while budget deficits rage on.  Neither Presidential candidate seems to care about profligate spending.  At least not until they get into office.  Hence, high rates volatility.  Markets will be watching each and every data point from here on in.  We need that rates vol to break lower for markets to breathe a sigh of relief.  You can watch it yourself by looking up the MOVE index.

GDP numbers a little weaker than expected but job creation much higher. Personal spending and PCE inflation numbers coming and then non-farm payrolls and the unemployment rate on Friday.  Oh, and throw in manufacturing data for good measure to round out a massive week of data and earnings.  But again, markets have been incredibly stable in the face of all this…. as they await the even bigger events of next week.  It’s feeling like a few Super Bowls back to back to back.

Quality Watchlist

Our trades are thriving, with the aforementioned META position killing it.  At $563 my target was $613 – we’re already near $600 and the darn earnings aren’t even out yet.  COIN continues to print coin.  Our MARA call is doing well although it pulled back yesterday.  Covered calls in UBER and Palo Alto continue to bake off nicely.  UBER earnings are this week as well so we’re watching for that – I’m not a huge fan of selling premium into earnings.  

I’m looking to strap on an upside butterfly in MSFT if things line up nicely.

Recent Winners

The BABA condor is working nicely – I wanted to cover my short 155 call but instead took the opportunity to pick up a Dec 130/145 call spread for almost the same price.  This gives us massive upside if China decides to go for another run higher, which it will in due course.  Our HOOD cash-machine trade continues to print.  CELH puts are under threat but Micron cash-secured puts are looking good for a profitable close soon.   Our SOFI sale a week ago above 11 was inspired as the stock fell to 9.75 on earnings.  But I’m looking closely for another upside play here.

Our MCD downside fly is sitting pretty – we took off half for a 45% win in 2 days and the rest is on the cusp of doing even better.   But I may have to take it off if I don’t get the move down to $285 that I’m hoping for.

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