Hab Technology

Theres nothing like finishing a red week with a 3.5% up day to lessen the blow, but even with that, the nasdaq was down another 2.6% for the week. My porfolio lost 3.7%, again due to my large position in AMZN, which I still think is going to work out in the long run.

I couldn’t help myself and did 1 trade this week. On Wednesday, with AMZN below 2100$, I opened a May 2060-2000 put ratio spread for a 1700$ credit:

It was literally a 1.5 week position with break even of 1923$, and I can’t see AMZN dropping below 2000$ for an extended period of time. Since AMZN went up 120$ on Friday the position made 1500$ (on paper), which I may take off the table next week before expiration to free up margin, just in case the market continues its bloodbath, but actually theres potential to make 6k$ more if AMZN does go down towards 2000$, so it may be another situation where its better to just stay put. Either way, hopefully it will be another 1500$ realized gains to offset all the existing paper losses.

I like using the VIX to help gauge what could happen from here because the VIX does normalize. Whereas the indices can go up or down for a long time, the VIX goes up while the indices go down, but over time it will decay as the lower index values stabilize… Currently, the VIX has been trading relatively high for a relatively long time. The rundown in the nasdaq since April has been brutal, but as was the rundown from Jan-mid March. One up day doesn’t mean anything, there was also a 3+% up day last week, which disappeared completely (and then some) the next day, but from looking at the VIX I can’t help to feel that we may be nearing some at least short term bounce from here (possibly like we had during March):

If it doesn’t happen, we’ll ride out the storm by deploying some more cash, I currently have 150k$ cash buying power, so ⅓ of my portfolio, so plenty to double down on existing positions which have fallen out of probability if the market does continue down another 10% from here.

If we do get some kind of meaningful bounce which lasts 1-2 months, the portfolio stands to gain a good amount of money.. Honestly I tried to figure out if there was a good way to forcast exactly how much but because most of the portfolio is made up of short option positions, and far out in time, its very hard. I do know that today when the nasdaq went up 3.5% my portfolio gained 29k$ or 6% so thats one good sign. The other thing I know is just on my short term (<2 month) positions on AMZN, if they all expire worthless (the long and short options), thats another 22k$ right there, and ideally I wouldn’t let the 3x BPS expire worthless I would close it if AMZN pops back up towards 2500$. And in addition to all that, the VIX would be lower, as well as some time went by, which would decay the values of all the short options significantly. And considering the market value of my portfolio is -161k$, thats a lot of value which could decay.

On the other hand, 161 – my current 65k losses YTD is only 100k more to gain over the next 2 years, or 50k/year, which is 10% per year, so not horrible but not amazing. It may be time to take advantage the high VIX and deploy some cash.

For now lets wait and watch what happens next week.