The LongVol Report Issue 10

Volatility Regime.

Good afternoon.

I just got back from a quick trip to Rincon which is on the other side of the island. I tried to surf but I’ll prob stick with wake-surfing, it’s way easier! But overall, a good weekend and hope you all had a positive one a well.

I am going to cover the outlook here and then address a question at the end (partially) from a long-time reader: part of it will be free, the rest for paying members.

Quote of the week:

There is no such thing as information overload…only filter failure. - Taking that from a VC friend of mine but he’s right.

We have a big data week this week starting Tuesday so that brings in a lot of catalysts for market moves. I expect a lot of volatility all week and especially into end of week.

NVDA -

This week the $840-$850 area is a spot I want to watch for trades; either day trades or overnight shorts but let me say, this is trading—- This is what I am going to discuss down below: forecasting v. trading.

Checkbacks of price are just light moves higher to that area for me. Once we get there, I am looking for two Playbook setups:

1. ODR - outside day reversal

2. Opening range drive short

That’s the plan for the week. You have a zone, and you then anticipate the potential intraday trades from that zone based on 1 of 2 Playbook setups.

SPY/S&P500 -

$505-$508 on SPY is support with $520-$525 area being a spot to be cautious. If we get anywhere near there this week on gap up, news drive higher that should get sold hard; I hope that scenario plays out because a lot of names in The Momentum Monitor are at areas to watch for some vol trades that should be intraday to 1-10 days.

SOFI -

This chart is very bullish anyway you look at it but let me get into the idea of price forecasting v. trading here as this stock being the example.

With a stock like this you can do a few things: you can day trade it for 50 cents in and out, you can buy the shares and hold it or you can short-term trade the options.

For me, I’ll take the price forecasting route v. the trading route here for a few reasons.

1. The stock could turn into a double down the road but there are hurdles (revenue etc) that it has to get by.

2. If you take this stock and try to use it to capture volatility (day trading it or using short-term options) it’s a waste of capital - there are 20 names right now you can get a better ROR on using a vol capture approach, which day trading is.

So, assume that earnings improve, and this becomes the inflection and that it trades to $15-$18 a share. That’s +80% or more away, a big move. That’s price forecasting, not trading. I don’t see it as a “value” play either, personally. The structure could be with DITM calls 6 months out + LEAPS that are slightly OTM (just like we did on HIMS 0.00%↑ cleared a ton on and closed last week).

That was forecasting, we got in, we made money and we’re out - yet you have people still wondering if there’s more left in it - my take: who cares. When you learn to structure a proper portfolio of long/short ideas and spread the capital risk out with structured trades you are not dependent on one idea.

While I think SOFI 0.00%↑ has potential it makes more sense to own the LEAPs or DITM options for now and add the asymmetric edge to it with options. If it runs to $16 great. But, what I am not going to do is put a ton of capital into one idea or sit here and tell you all a story to fit a narrative about it.

The sock can rally; it can double for sure, but I don’t know when and it has to continue to beat and guide well and those are too many uknowns for me.

So the solution? Ride the forecast with DITM calls and OTM LEAPS.

The full weekly outlook and market plan is inside covering Issue 10 of the report and a few top ideas for this week.