7/23 Recap

The IWM continues to outperform the QQQ, today the IWM is up nearly 1% and the QQQ is red. Tom Lee discussed the IWM possibly going to 300 by the end of summer, it seems outlandish, but rate cut odds are now at 98% after today’s dismal housing number this morning and small caps are loving that. Alot has changed in these last 2 sessions. You have to remember markets are dynamic, you just have to go with what you’re seeing. Going into the weekend friday we had a full blown Trump trade being priced into markets. Things like oil were looking good because Trump was leading by alot and a Trump presidency would have been favorable to them. Over the weekend, we got Biden dropping out and Kamala replacing him and now Kamala isn’t even that big of an underdog with the betting markets so now things like the oil trade are going from a high probability Trump win to a more neutral stance with things like the XOP that were seeing big inflows last week pulling back as the election is now more of a tossup. These are the current odds, not exactly a a big favorite like he was friday when markets closed.

The IWM remains the leader short term more on rate cut probabilities than anything else. It had an orderly pullback to the 8 ema below and took off again. The rest of the market is very lethargic mostly. Today will be a big afterhours session with Google and Tesla both reporting. 2 of the the 10 largest companies kicking off megacap earnings and their guidance will be much more important than their actual prints. Will they be cautious? Will they guide up? We will have to wait and see.

Recent Trades

We have 2 weekend best idea to discuss today after big moves on earnings. I wrote up SPOT as a long back in January with 2025 calls and I wrote up UPS as a short, which I never do, with 2025 puts in February. SPOT is up 13% today and UPS is down 13% today, both trades should be closed if they’re still open on this.

UPS - I wrote this as a short here on 2/10. The put spread I drew up had a max payout below 130 in January, it is 126 today. It took a long time, 5 months, and alot of nonsense pumps in that timeframe, but UPS finally died today. Look this is a has been company, their numbers were terrible in Q4 and have continued forth, but this is why I don’t waste time shorting things, the market is mostly higher and the rising tide lifts all boats. Alot of you ask me why I don’t spend more time highlighting bearish trades. The reality is that it is easier to find something going higher, than waste time battling to the short side. This was a perfect example of why you don’t give up on a trade when you have a long time to expiry. It took awhile but UPS finally collapsed, new 52 week lows today means its probably done, but I would still close up if you have it, when you’re short you have to be tactical because there will be some pump soon again I assume..

As for SPOT if you’re still in this after it has run 70% from when I wrote this up on a weekend in January here, then you are sitting pretty with the name having gone from 203 to 331 since. The trade below was a ratio because I tried to be conservative in using put spreads vs naked puts incase the name collapsed. Now those put spreads are nearly worthless which is a huge win, but those $210 calls went from $30 to $130 but because of the put spreads sold lowering your basis, they went from $10 to $130 for a monster return. This is your case study on why I highlight risk reversals. Not every one is going to work, if you want a high probability trade, then just sell puts or put spreads, but you tie in risk reversals to put trades on for no cost and that is how you get huge trades like this or CPNG recently.

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