Somebody in the room told me they got stopped out of a spread. I want to talk about that for a minute, because it drives me absolutely nuts. Did anybody ever ask you to put a stop order on a defined risk trade? A spread has your risk written into it already. You paid what you paid, and that’s the most the market can take from you. So you don’t have to further define your risk on an already risk-defined trade, do you?  I’m just asking… People that put stop orders on spreads, there is something wrong with you. I don’t care whether you bought it or you sold it. And if you don’t like the risk, I’ve got better news for you. Don’t do the damn trade. Does that sound reasonable? Does it? Here’s what happens when you stop out of a spread. You take the loss at the

Google turned $900 million into $94 billion. That’s the SpaceX stake Alphabet disclosed last week, 551 million shares, about 4.2% of the company, off a check they wrote in 2015. More than a hundredfold in ten years. Nvidia showed up with $21 billion, its second largest disclosed equity position after Intel. That one came in sideways, out of a $10 billion investment in xAI that turned into SpaceX shares when Musk folded xAI into the rocket company. AMD is on the cap table too. So is Norway’s sovereign wealth fund, the Saudi PIF, Fidelity, and the University of California. And Harvard. Harvard Management’s single largest stock holding is SpaceX, at $2.2 billion, which works out to 52% of their entire disclosed US equity portfolio. TSMC is second at about a sixth the size. Who would have thought Google is buying SpaceX? Isn’t that kind of like one of your competitors?

Open interest is the glue that holds a market together. When an index trades in the same area for weeks, contracts pile up at those strikes and never get closed. That accumulation builds into an enormous ball of risk sitting under the market. It is the reason most days feel orderly. Dealers holding the other side of all those contracts have obligations. They hedge as price approaches a strike and unwind as it moves away, and that mechanical activity anchors the tape whether anyone notices or not. Roll your chart back into any area where the market spent real time and you will find a proverbial crap load of open interest sitting there. Trade in that neighborhood is solid, more predictable, and it behaves the way you expect a market to behave. Now take the glue away This week the S&P 500 blew through its weekly expected move and kept

The S&P is at an all-time high on four stocks. Nvidia was flat on the year a week ago. It’s now up 18%, which on a $5.5 trillion dollar company means it added close to a trillion dollars of market cap in six or seven trading sessions. Microsoft was down 25% at one point. It came ripping back and added almost a trillion of its own. Amazon was unchanged on the year and is now up 20%. Throw Google in there at 15% if you want to get crazy. Four products account for nearly everything going on inside the S&P 500. One little tiny basket. I don’t find this warm and fuzzy at all. Not even a little bit. The sector that got us to this all-time high is collapsing while we sit here. Semiconductors are up 51% on the year, and they are the reason the S&P 500 is

I was on Schwab’s Trading 360 this morning. Ran through three trades with Rick. Marvell, Netflix, and Meta. All three have setups working right now, but for very different reasons. Marvell — this is a fade. The stock’s rallied hard off the lows, and I think it’s a bear market bounce. I’m shorting it with defined risk using a put spread. But the key here is WHERE I’m getting short and WHY that level matters. Rick walked through the exact support zones and gaps that make this trade make sense. Netflix — caught in a downtrend, but I think it’s got a short-term pop in it. Not a big one. Maybe up to $80. After that, I’m out. The question is how to structure the trade so you’re not holding the bag if it reverses. Rick showed the technical confluences that line up with my target. Meta — another defined

A squeeze dies before your chart tells you it did. Most traders watch a market rip and figure the move feeds itself. It does not. A squeeze runs on one specific mechanical obligation, and the second that obligation gets satisfied the fuel is gone, no matter how good the candles look. This morning is showing it. Holy crap, somehow it is August, and we opened the month by blowing straight through the top of the range. We closed Monday literally, I mean to the freaking penny, on the upper edge of the expected move. I drew that line over the weekend at 7,600 and we closed 7601.15. Then we opened 30 points outside it and are now trading well above 7700 on the S&P 500.  Two straight weeks without tagging an edge, and now we are not only hitting it, we are through it. That is where the gamma squeeze

A hedge fund named Situational Awareness blew up last week. Which is ironic, and it’s also the oldest story in this business. Brilliant people, a firm that prided itself on knowing what was going on, and it turned out they had no idea what was going on. They were taking shots at one-hit wonders. You don’t survive doing that. Go look at Long-Term Capital Management if you want the older version of the same movie. Some of the brightest minds anybody had ever assembled, and it was the math geeks running the portfolio. I blame the geeks. And I’m allowed to, because I watched it up close. At thinkorswim we had twice as many developers as we had traders. Plenty of those developers came over and started trading. Some success stories, some horror stories. The development brain is spectacular at a lot of things. Risk aptitude is not automatically one

The VIX is going to be your worst enemy. I keep saying this. I’ve been saying it for years, and people do not get it, and it’s infuriating. The VIX is 30 days out and it’s an equation. It prices how much movement traders expect in the S&P 500 over the next month, and then it gets quoted on television like it’s a reading on your portfolio. Now go look at what you own. Friday morning the VIX sat at 17. The sector that was driving markets that day was priced over 105% implied volatility for that single session, and the Nasdaq’s volatility index was at 27. Implied volatility is the market’s price on how much a thing moves, so a 105 means the market has no clue where it lands. Equity volatility is sky-high. It’s sick how far off the scale it is, and none of it shows up

The S&P is 4% from its all-time high. Four percent. Now go compare that number against the volume of screaming you’ve heard this week. I’ve never heard this many people complain about a marketplace that’s only 4% from the all-time highs. Have you? Have you ever heard this much fear, at this magnitude, over a decline that small? The answer is absolutely not. Pull yourself together, you monkey. What all that noise is actually telling you If a 4% decline produced pain that matched the move, nobody would be making this kind of racket. The racket’s disproportionate, which means the damage is disproportionate, and that implies one very simple thing. Clients aren’t vested toward the S&Ps. They’re invested heavily toward their AMDs, their Intels, the semiconductor complex. Those are the ones taking the brunt of the hit in this sell side activity, and that’s why the noise level doesn’t match

Everybody’s got this backwards. The story people carry around is that a market crashes from euphoria. Everything’s at all-time highs, everyone’s giddy, floor falls out. You never crash from all-time highs. You crash when you’re in oversold conditions. Are these things in oversold territory right now? Hell yeah. And that’s exactly what should have your attention. Everybody watches for a top when things are stretched to the upside, and that’s fine, but the top isn’t the dangerous part.  The violent move comes later, once you’re already oversold and the selling doesn’t let up. Once you’re there, no one cares about any of the fundamentals when there’s sell-side activity. You can read me the balance sheet all day. The bidless beast has arrived and it doesn’t care. So how do you trade it? You don’t short into holes. I say we, but traders do not short into deep holes like this.