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I’m on Maui right now so the Fast Money Halftime report airs at 7 am. That’s right about the time I head out for a run, so I tend to listen to it through my phone.  Here’s a view from my running route. 

Sometimes it’s hard to pay attention! 

Tony Dwyer was on again today, so I paid close attention. You may recall that he predicted the most recent downturn last month but said that the downturn would be the opportunity to buy. 

Today, he strongly believes that we retest these lows. He is not recommending selling and running for the hills but instead says when it comes, don’t panic and sell, but instead buy the dip. 

I tend to believe him, but I am not convinced of his historical argument. I agree that the past gives us an idea of what can come next but I also subscribe to the adage that is, this time it’s different. Actually, I think it’s always different, each and every time.  

Here’s what I think is different. For one thing, this recent pullback shook a lot of confidence. Howard Lindzon’s newsletter talks about the return of fear this morning. Tony Dwyer’s previous call for a downturn was based on market sentiment becoming too bullish. That’s no longer the case, as evidenced by the big data provided by Stocktwits bullish/bearish indicators.  

Secondly, the QQQ’s remain positive, even this afternoon when SPY has turned negative. That means the big players, AAPL, GOOGL, FB, AMZN, etc are still getting bids. I think its hard to have a meaningful pullback without these names coming under pressure. 

Having said all that, I have hedged my longs just a bit. How? 

• In my speculative account I bought more UVXY and sold a next week 18 call for a net debit of 14.95 (a buy/write) 
• In my less risky account where I only trade in SPY options I bought an April 20 270/260 put spread for net debit of 2.12 (I bought this at about 10:15 am eastern when it looked as if the SPY was going to close higher today). 

I have not taken either of these trades off today, although I could probably make a small profit on the put spread.  

Today’s market close was pretty ugly, but its hard to say if it’s the start of something bigger or not.  

Today I’m adding a bit of WalMart to my investment account. I’m buying a ‘starter’ position of the equity in this account. I bought at $95. 

In my speculative account I am going to buy a small number of call calendar spreads, buying to open the June 15 95 call for 4.95 and selling this Friday’s 95 call for 1.05 for a total debit of 3.90. 

With the call calendar, I will roll the calls weekly unless it really gets its footing and makes a move up above $100.  If that happens I will start to add call credit spreads.

WalMart reported today and basically admitted that the benefit from the new tax bill would not really apply to them, as it would some more USA focused companies. 

I am buying for only one reason, it’s a Dow 30 stock that’s down 10% on the day. That’s just too big of a haircut.  

I could be wrong and it could go down more. But if it does, I buy more. Here and now the dividend is approaching 2%. 

At the risk of being, once again, labelled a moron, I am going to say that this name has just ‘gone down enough’. 

Several years ago, you couldn’t watch CNBC for any length of time without a commercial for TradeMonster. I opened a TradeMonster account and actually attended a seminar in Newport Beach with Pete Najarian, Dan Fitzpatrick and Guy Adami. It was 2013, I think. 

On these commercials, they implored you to ‘Trade like a Monster’. 

Today, I’m not trading like a monster. I’m trading like a moron. 

In my speculative account, I have held a long position in VXX and UVXY for a year. I wrote covered calls against these positions, week in and week out. Many times, I would only get the proverbial nickels. 

This worked until last week when both the VXX and UVXY simply just exploded. I got caught a bit offsides as I was short calls. For the UVXY I was short the 20 calls that expire next week when my cost basis was around 11.  

Granted, that’s great right? I mean making $9 on each of these is a good, almost 100%, return. But on Monday the 5th, these popped to over 35, 38 in after hours. Its trading around 26 today. 

Late in the day, thinking that this was overdone, I bought a small amount of XIV at 96. It closed on the 5th at 99.  Today its about 6.

After hours, these derivatives went bonkers, bananas, ape sh*t crazy. 

The next day as things corrected a bit, I was able to buy some calendar debit spreads on VXX and UVXY to take advantage of this volatility on the volatility.  

My longs in UVXY and VXX more than offset the loss I have taken in the XIV. On the volatility trade, I am making money. The other names are a different story.  

Yesterday and today, I hear from Jim Cramer that I am a moron for buying the XIV. I think he said only a moron would buy it.  

Well, as they say, you can’t fix stupid. Yesterday I bought some calls in SVXY. Fidelity won’t let me buy the ETF but they will let me buy calls. I bought more today, specifically the June 10 call for 2.58. 

Remember, it was just a week ago that the SVXY was trading about 130. It went out on Monday around 58. 

It would be wonderful if SVXY goes up to 58 or 100, but if it just goes above 12.58, these calls make money. Everything above that is gravy, or icing, you choose the metaphor. 

In addition, I have bought a March Put spread in the VXX, I bought the 35/30 spread for 0.75. 

If volatility comes back to anywhere near normal, these pay off. The SVXY trade will pay off like a lottery ticket. 

But you really shouldn’t listen to me, I’m a moron.  

Yesterday, in after-hours trading the SPY traded down to 264.3. Just moments ago, the SPY traded to 263.68. 

I’m no technician, or anything else for that matter but that seems pretty close. It looks like it’s moving back above 264 as I type this at 11:30 Eastern.  

Before I go any further, please note that NOTHING I write here is to be construed as financial advice, before you make any financial decisions you should consult with your financial adviser. You’re a big kid, act like it.  

That being said, I am going to BTMFD, which if you don’t know means “buy the motherf**king dip”. 

Sure, it feels horrible and the wrong thing to do. The VXX has spiked 10% and the UVXY has spiked 20% or more.  

But on the other had consider the following names, all have reported earnings and there seemed to be no apocalypse in their balance sheets. Hell, even Mr Wonderful loved the first one: 

• BA – down 1.82% 
• BABA – down 2.34% 

• FB – down 1.6% 
• JPM – down 1.67% 
• NFLX – down 1.85% 
• SCHW – down 2.4% 

All of these names were down more when the SPY hit that intraday low. Why? Who knows. I think it’s ‘just cuz’. 

Tony Dwyer was on Fast Money at noon and in the afternoon several times over the last few weeks. He argued, every time, that stocks should perform well this year. But just within the last two weeks he thought we would have a pull back because there were no bears, that the sentiment had gotten extended. He argued that when that pull back occurs, one should buy that dip. If I remember he said ‘with both hands’. You can see a tweet from him here.

While I’m not gonna go in with both hands, I am going to get a bit longer at these levels and I’m going to do it with call spreads. 

Just now I bought the July expiration 280 calls for $4.60 and sold the July expiration 289 calls at $2.1 so it cost me $2.5. I can make $9 on each of these contract pairs. I sold the 289 calls instead of the 290 calls as I can buy the 290s as part of a calendar spread in the future. 

Could be wrong, but will pay off at more than 3:1 if I’m right . . . .  

Good Luck today!