The hedges we started over three weeks ago are much higher this morning, due to the recent developments and news cycles. SQQQ and SPXU are working, as such, we’ll stick with these until price action requires reassessing the position.
SPXU and SQQQ
We are managing covered calls on half of our SQQQ position, selling the MAR25C on Wednesday for 3.10. We’ll be happy to roll these covered calls up and out into April this morning. STO at highs BTC on dips. Repeat.
We’ll choose a strike that helps lock-in gains from the shares while capitalizing on the expanding volatility premiums. We may be able to roll them higher for credit.
For example, at the close, our MAR25C (covered calls) closed at 3.20 ask.
The APR31 was similarly priced. Both strikes will be proportionally higher this morning, so we’re looking at the 200ma and 29 to 34 zones as resistance. We’ll buy the calls back on dips. If the markets continue higher we’ll repeat the process.
Alternatively, if you’re long the same MAR25C you can roll some up and take some profits on 1/2 this morning. We might take some profits from the shares for the same reason.
The original core entry has a cost basis adjusted to 18.00, which includes profits from covered calls sold and bought back over the past few weeks.
With the news being so bleak, many traders will be shell shocked. We aren’t that interested in trading much until the markets find a floor, so be patient. Don’t over trade and keep that cash ready for opportunities that will undoubtedly arise in the next few days.
Hopefully, you remained cautious and took profits into strength as suggested in the run-up to all-time highs. We suggested caution.
If you are caught with long exposure, consider selling covered calls on bounces. We’ve focused on quality stocks, so most will pay dividends.
More importantly, many people you know may be working paycheck to paycheck. Remind them that the government plans to vote today on a bill to help relieve financial stress. We’ll get through this.
Finally, Spring is coming. The sun, wind and fresh air will help!
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during market hours, as we navigate the current environment. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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