Today, we jumped into three new trades— one long and two shorts.
The tape has been messy lately, with little follow-through, so my main goal is to manage risk while positioning for new opportunities.
We made a bearish bet on housing, which has been as ugly as anything. And we also bought IBIT puts — but this is as much a hedge as a bearish bet — considering our current long exposure to crypto.
We put those out this afternoon, as the action in crypto and builders deteriorated throughout the session.
For builders and Bitcoin— both of which look vulnerable at their VWAPs from the April lows. If these laggards are going to break down, now is the time.
Builders FirstSource $BLDR reported earnings this morning. What initially looked like a positive reaction morphed into an afternoon sell-off.
The stock cratered 10% from today’s highs before closing at its lowest level since June.
Based on this earnings reversal, odds are high for downside follow-through in the coming days and weeks. With our squeeze indicator signaling that a volatility expansion phase is underway, the stock could make a big move lower.
I bought $BLDR 11/21 $105 puts for $2.80.
As for Bitcoin $IBIT, it’s taking out key highs from earlier this year and the VWAP anchored to the April lows.
This trade could work fast if BTC breaks down further… The real risk, in my opinion, is that the crypto mess continues and we get chop instead of any real downside.
I’ll be looking to take profits quickly in this one. And I expect them to come quickly IF it’s going to be a winner.
The real reason I want the short exposure is because we already have long exposure to the space, and with these trends continuing to deteriorate, odds are higher by the day that the volatility expansion comes in the form of downside.
The weekly squeeze indicator on IBIT as well as Bitcoin itself is at an all-time low.
In other words, Bitcoin has never been coiled so tightly.
A big move is coming. Now we have exposure in both directions.
I bought the $IBIT 11/21 $57 puts for $1.30.
This post was originally for paid members only. It has since been unlocked for informational purposes and does not constitute financial advice.
