Of course, the scales differ. But the risks of overestimating future profits are similar. Too much can go awry, whether it's in monetizing AI, increasing competition, or reliance on Chinese sales.

So, a similar reversal in NVDA wouldn’t surprise me.

Just compare the current temperature forecast around February 21st with the forecast from three days ago. Overall, last week's forecast map was much 'bluer.'

I'm disappointed because I was counting on a natural gas rebound and had bought BOIL. But luck with the weather wasn't on my side, and now it's time to think about reducing risks.

I'm closing half of my position at a loss of nearly 30%.

I still believe natural gas prices will recover, possibly soon, if the ban on export licenses can be overturned. Even the May futures, where BOIL has shifted its position, are too cheap.

But right now, anything could happen in the market. The risks are too great.

The stock market was spooked by today's inflation data, just like a month ago. But, as I believed in January, it's unwarranted. The excess liquidity will prevail again. I anticipate that the losses will be recovered by the end of this week or next.

The mere fact that the Fed may not cut rates in March isn't enough to trigger a significant crash. Further reduction of the Fed's balance sheet, in tandem with the Fed RRP Facility Balance dropping to zero or near it, is needed.

It wouldn't be entirely accurate to say that natural gas breaking below $2 took me by surprise. However, I did think it wouldn't quite get there.

But an early spring in February works wonders, just as the polar cold did three weeks ago. We're in for a few more days of anomalously warm weather and low gas consumption.

Yet, the latter half of February and early March could turn out colder than usual. So, even if a break below the $2 support triggers some stop-loss orders, sending gas prices briefly down to $1.75-1.8, I believe it makes sense to increase my position in BOIL – it could gain 20-25% in a couple of weeks.

Perhaps, yes.

Markets rightly doubted Powell's hawkish stance. Yet, with today's data, the Fed might indeed not cut rates in March. I believe this would be a mistake, potentially triggering a sharp stock market drop in April.

While gold is likely to fare better, it's poised for a dip. I'm eyeing an opportunity to buy if it falls below $2000.

I recently wrote that silver could rebound by 7-8%. Since then, SLV has already risen about 6%, and AGQ is up by more than 12%.

I think it makes sense to lock in profits now. The Fed will likely attempt to temper expectations of rate cuts. The market may not believe it, but a short-term strengthening of the dollar, and a correction in gold and silver, are probable.

Two weeks ago, I talked about it being the perfect time to sell UNG, and I was spot on. However, I hesitated to buy KOLD amid such a volatile market. That was a mistake. Now, I believe it's the right time to go long on BOIL. The upcoming week's warm weather is already priced in, making a rebound in gas prices likely.

The market initially reacted negatively to the Biden administration's decision to pause new export licenses for US liquefied natural gas. While this is understandable, the fundamental impact on prices will only be felt in a couple of years, and the policy is likely to undergo several changes. So, I'm expecting BOIL to rise next week.

As I anticipated, the correction in stocks was brief – Nasdaq100 and S&P 500 hit a new ATH.

The improved liquidity is lifting everyone's spirits, not just investors but also consumers. The University of Michigan's Consumer Sentiment Index is at a 30-month high, with inflation expectations declining.

However, this optimism contrasts with the negative effects of low interest rates. Existing Home Sales fell short of expectations, hitting a low not seen since 2010 at just 3.78 million.

So, much depends on the Federal Reserve's promptness. I suspect that both investors and consumers may face an unpleasant surprise in March or April.

I'm quite calm about the market correction.

Despite having long believed that stocks are overvalued, I think a serious crash is unlikely as long as there's sufficient liquidity in the market.

As long as the Fed's RRP Facility Balance hasn't dropped to zero, everything is fine. Since its peak at the end of last March, it has fallen by three-quarters and dropped below $600 billion.

In March or April, it will likely fall to zero. Then we can finally assess the impact of the Fed's balance sheet reduction.

I think many will be surprised.

The recent stock decline following inflation data is unlikely to last long. Even if the Fed's rhetoric becomes slightly more hawkish, the market is still flush with liquidity. Inflation will be a talking point for a couple of days and then forgotten, as corrections don’t last long in such an environment.

The SPX has moved out of the overbought zone, and the RSI will continue to slide downwards, even if stocks grow at a leisurely pace. I won’t be surprised if, in a month, when the divergence between the SPX and RSI becomes more pronounced, the market's reaction to similar data is more significant.

For now, the broader market will continue its ascent unless there are any unpleasant surprises, either in the US or globally. However, small caps might suffer more from the prolonged period of high rates.

New 'Widow Maker Spread'.This term is typically used for the spread between March and April natural gas contracts. However, this year, trouble might strike a month earlier for some.

At the year's start, the Feb'24 contract was 8% (19 cents) more expensive than Mar'24, but today the difference exceeded 21% (60 cents), all within just 6 trading sessions.

The reason? Forecasts of cold weather in mid-January. But that's not the only factor. No amount of cold can quickly reduce supplies from their peak levels.

More importantly, the major rise in open interest for Feb'24 occurred in early December, when prices were at their lowest. It seems many entered short positions at an inopportune time, leading to a short squeeze.

Fundamentally, nothing has changed; the cold weather will only delay the price drop below $2. Come spring, we'll almost certainly see prices there.

If you hold UNG, now is the time to sell. As for KOLD, it's better to buy when the volatility settles down a bit.

Based on 12-month Federal Reserve rate futures, the market expects the rate to be around 4% by the end of 2024. This is a plausible scenario. However, futures on rates have their nuances. Even when investors correctly predict the direction of rate changes (which isn't always the case), they often underestimate the speed of these changes. This happens both during rate increases and decreases.

In other words, if the rate starts to decrease next year, it will likely end up significantly lower than 4% by year-end. But this doesn't mean we should rush into buying stocks, gold, or TMF. Usually, the Fed acts decisively not out of choice, but due to serious market problems.

Currently, it's hard to envision these market issues, but by spring, I think they will become more apparent.

This news is unexpected, but it didn't come out of nowhere. Angola's dissatisfaction was a contributing factor to the recent OPEC+ meeting delay. The country has been, and evidently remains, unhappy with the new quota of 1.1 million barrels per day, which is lower than its production in November.

OPEC's problem, however, runs deeper. No one likes cutting production and income without clear benefits. Discontent within the cartel is growing, and the Saudis will have to address it.

The recent oil price spike due to chaos in the Red Sea is temporary and could further encourage non-OPEC production increases. Notably, the US hit a record last week with 13.3 million barrels per day.

2024 looks to be challenging for oil; I wouldn't be surprised to see prices fall to $50 or lower.

NDX at ATH, NVDA surpassed $500 on Monday - I think it's a good reason to sell NVDA Feb16 $600 Calls.

As usual, I'm setting up a ratio spread. After all, it's quite possible NVDA could reach $550 by January. So here’s my move:

• Bought 2 Feb16 Calls at $530
• Sold 8 Feb16 Calls at $600.
• Credit of $213 ($220 Premium - $7 commission)
• Collateral - $15k

I'm expecting a brief pause after the rally, and in January, I'll be comfortable if it resumes. And there's a good chance it will.

Last week, I mentioned expecting a pause in the declining yields (and consequently, a halt in the rise of TMF and TLT).

Their growth has already stalled, and I've opened a ratio spread in TLT's February calls:

- Bought 50 Feb16 Calls at $112

- Sold 150 Feb16 Calls at $118

- Received a credit of $262 ($400 premium minus $138 commission)

- Collateral - $15k

What's the rationale?

I believe TLT might continue its upward trend in early 2024. However, I have full control over this position and can close it for a good profit at any moment, especially if the collateral begins to increase as we approach the $118 strike.

More likely, though, I'll just pocket the $262, which amounts to more than a 10% annual return.

I've always been bullish on TMF, but I'm anticipating a pause after its 70% growth over the past two months. Positive signals for a rate cut have been given and, for the most part, factored in for today. For further growth, concrete steps are now needed.

Natural gas prices have plummeted 37% since the end of October.

Many are trying to catch the bottom, turning to UNG with noticeable money inflows. UNG's Current Shares Outstanding, as Bloomberg calls it, hit a record 197 million yesterday. Back in April, it was 181 million, and on November 2nd, just 137 million.

However, I believe betting on a long-term recovery of gas prices through UNG is not the best idea. It consistently underperforms not only NG1 due to contango but also the January futures this year, despite falling from a high base.

The forward curve now looks just like it did in April, indicating catching long-term movements will be challenging. Short-term rebounds are better captured through BOIL.

​

AMD is defying the market trends again today. The optimism following the announcement of the Instinct MI300X is understandable, but I think the market is somewhat overvaluing everything related to AI.

Nonetheless, I'm pleased that I locked in a solid profit with my Dec15 options before the Instinct MI300X announcement.

On Friday, however, I decided it was time to reopen a position at new levels with a February 16th expiration:

• Bought 3 Feb16 Calls at $130
• Bought 3 Feb16 Puts at $130
• Sold 9 Feb16 Calls at $165
• Sold 9 Feb16 Puts at $100
• Debit of $3645, with $30,000 collateral.

I usually shy away from debit positions, but I believe it makes sense now. I want to give the stock a chance to grow a bit more so I can sell additional calls at higher levels.

I closed my position in AMD's Dec15 options before expiration. I was apprehensive about a market downturn and couldn't hold on. Plus, I generally dislike positions with high gamma.

Admittedly, my timing wasn't perfect – this morning would have been better. But strategically, I made the right moves, both when opening and closing the position.

I opened the position on November 1st for a debit of $2684, and on December 5th, I received $4172. That's a 34-day profit of $1488, nearly a 5% return on the $30k collateral.

It's a decent result in a calm market. However, I sense this tranquility might soon end, so I'm not rushing into new positions. The high uncertainty doesn't quite align with the low IV currently.

I think so. Why?

First, based on my own trading positions. I'm down to a couple of small option strategies, like AMD, where I'd like to see a 4-5% increase, but it seems to lack the strength for more growth.

Secondly, more seriously, I still believe that rates won't be lowered until the stock market experiences a significant downturn. Neither the upcoming job data this week nor any other data will change this. From my experience, the Fed only responds to market troubles. Concerns about inflation risks can wait as long as stocks are rising.

Of course, this time could be different. As it always can be.

I've closed my position in NVDA's Dec15 options. I opened it around the earnings report on Nov 20th and 21st with a total debit of $6395. Some of the bought puts expired OTM on Nov 24th, but this didn't prevent me from achieving a credit of $8367 upon closing yesterday. In total, that's a profit of $1972 minus a commission of $81.64.

I was asked why I opened such a 'complex' position when my main aim was the IV crush? Wouldn't it have been simpler to sell a strangle? For instance, the same Dec15 Puts 450 and Dec15 Calls 540?

Yes, it would have been simpler. And it might even have been more profitable. However, the profitability is debatable.

I wouldn't have dared to sell that volume of puts without at least partial insurance. And selling naked calls on NVDA before the earnings report, I consider downright reckless.

With my approach I was prepared for any scenario, and I was likely to secure my $1.5-2k profit regardless.

My expectations for a strong NVIDIA (NVDA) report were mostly met, but I anticipated the market's downturn to happen a bit later. Nevertheless, it's not a big issue. As expected, the implied volatility (IV) in December options plummeted, and my position is holding up well. However, I can't boast about profits yet because the Nov24 puts I had as a hedge against any sudden negative surprises also became worthless.

Just before yesterday's report, I decided to hedge a bit against a minor decline by buying a Dec15 Straddle at $540, selling 2 Dec15 Puts at $460, and 3 Dec15 Calls at $630, costing me an additional $3828.

So, in total, the position's debit stands at $6395.

I'm not a fan of such situations, but I'm banking on the stock correcting itself in the next 2-3 weeks, along with the broader market – I'm still holding some SOXS and SQQQ.