Cool Your Jets

“Cool your jets” is a saying from my longtime mentor, Brian Beamish. He runs one of the best trading schools that exists, and always served us this reminder in euphoric markets. It’s relevant here, because we are in one. We’ve run up more than 1000 points in the S&P in 5 weeks, one of the most brutal rallies since the Covid lows. Prudence is advisable, and while I am still taking trades, I’ve sold a considerable amount of my equity holdings in the past few days. Of the trades I am taking this week, one is a hedge (UVIX), and one is borderline gambling (MSTR). I’ll break those two down later in the publication.

In our last issue I focused on the BULLS and how I expected higher across the risk spectrum, hopefully with a slight dip beforehand. I emphasize the bullish MA crosses, particularly on BTC and potentially for new all time highs in short order.

We followed the Green Arrow projection almost perfectly. The KEY thing to understand here is all dips are to be bought… For the next 2~ weeks I would buy any dips into the 95-98k area IF we are lucky enough get them. I am looking for new ATH’s around 114-116k by June, however in the short term, risk is to the downside, and this is a good spot to take profits or hedge.

 I’ve been pounding the table on MARA for the last month. While it’s been a leader in the mining sector for a long time, I emphasized the staggering discount to book value and their huge bitcoin holdings as a main driver for me. The margin of safety here is massive, and so is the potential outperformance. The December $20 strike calls are now up around 60%. Short Term I am targeting $17-18 range.

$WULF continues to do very well – pressing up towards my $4 target. This executive team is absolutely top notch, unlike the other bitcoin miners these guys do not dilute the stock, and have returned shareholder value time and time again. They collectively own over 30% of the outstanding shares. In a full blown bull cycle with new all time highs on BTC, this can trade over $10.

In terms of crypto, BTC.D (Dominance) has likely put in a major top, which is a fantastic signal for alts. I would be shopping alts in the coming week, IF we get that minor pullback…

I’ve been bearish gold for the past two letters – I think it’s possible we’ve put in a major top. Geopolitical tensions are easing, tariff deals are coming through etc. Pricing in a $3k+ oz of gold will be increasingly difficult. For now, we are down almost $300/oz from my bearish posts, and at somewhat of a support, so a bounce could be seen here. I have no interest in longs however.

TRADE #1: For this week (particularly today) I am adding a very high risk trade on MSTR. I am buying the June 20^th 500 strike Call for around $10. This is a play on a potential breakout in BTC, and a lag currently occurring in MSTR. It also a play on suppressed implied volatility on MSTR options. So there are three “angles of attack” on this trade, which I will explain below.

The 30 day Implied Volatility (iv%) is a rolling measure of option pricing. The dark blue line on the chart below shows the history. It’s currently around 70, and in the past it’s been as high as 240 at the absolute manic peak in December 2024. Implied vol can easily go up by 50-100% in the next several weeks should BTC make a new all time high. This effectively adds a 50-100% premium on any options, which is a considerable boost to a speculative long position. These June calls are still highly risky, and admittedly, I am “chasing” the market here. They could easily drop 50% next week if we get a big pullback, so make sure you are willing to add and factor that risk into your trading plan if playing this…  

The S&P and other equity indices are in euphoria mode, leaving bears behind and squeezing through any attempts to short.

Remember what I wrote in the April 16^th newsletter? “I am going to stick my neck out again – the most reliable indicator I have is about to fire… this is something that has only triggered four times in the last 20 years, is right 88% of the time, and produces a 12-15% move on average to the upside.” – The S&P is now up 14% from that post… How’s that for a result?

TRADE #2: While it’s not a perfect short setup, given the ferocity of this rally, I have taken a shorter term long Vol trade, and purchased some contracts on UVIX, the May 30^th 26 Strike call, they currently trade around $2.80. I used about 2% of my portfolio equity here to hedge any potential washout into next week. That way I can keep my foot on the gas in my core longs…

TLDR;

1. Short term overbought, downside risk across the board

2. Dips still to be bought, ideally 96-98k BTC IF we get it

3. Touch grass today, I have sold some equities and raised 30%~ cash…

Trades:

MSTR June 20^th 500C @$10~ (extreme risk, willing to add lower)

UVIX May 30^th 26C @$2.8 (hedge)