So, our convicted felon did it once again. Americans didn’t learn their lesson in 2018 and they need to re-live the shit show once again. Today (Sunday, February 2nd, 2025) the furues opened down -1.85% on trade wars fear as I was afraid it would happen. On Friday, I finished trading with the following position:
 

After the futures opened, this position was deep in the money. The price smashed through all my strikes. I hoped, I could close the position as is and be done with it. I hoped the extra long puts would I added on Friday would help to offset losses of the short puts. But it was not the case. Closing the trade would still be a debit trade. And that I didn’t like at all. Also, closing the trades would require additional buying power which I didn’t have! Thank you convicted felon for f-ing it all up!

So, I decided to do a series of adjustments and rolls to eliminate the trades with minimal losses. I must admit, it ended up a successful operation. I did multiple closures and two rolls and I was able to get rid of those trades and make money, although, I cannot claim the cash as of yet.

Here is a list of the trades I took and list of contracts as I was unwinding the trade:
 

I ended up reducing contracts from 16 to 3. The 3 contracts are those I rolled, the remaining ones were closed for additional profit.
 

I am not happy with the overall outcome as it is throwing a wrench into my plans despite making money. This is still adding stress to my buying power which is still extremely low (due to my last year’s overtrading). And that’s why I am not happy with the outcome. I hoped to keep unwinding the trades, not fucking with them around because we have a idiot in White House. But it is what it is. We cannot do anything about it. The markets rarely do what we want them to do. All we can do (as Mr. Garfield, played by Danny DeVito, said it in Other People’s Money) is to adapt. So let’s keep adapting.

So Donnie is on it again. It is astounding how ignorant he is. Or he is not and all this tariff thing is on purpose. No matter how hard I try to think about what is he trying to achieve, I cannot come up with any idea on “why.” Trump negotiated a trade treaty during his first term and now he is complaining about subsidizing Canada? I thought his treaty was supposed to be a great, bigly deal! Biden hasn’t changed the treaty! So what went wrong?

I think, what went wrong is the fact that Donnie is f-ing it up again so he needs to maintain visibility and the best way to do it is to piss everyone off. An the entire nation will suffer.

It pisses me off. Yes, I admit I opened a 0 DTE trade that went sour thanks to idiot Trump but this idiocy is bigger than one trade.

On Friday, I opened a credit put spread. It was an extremely safe trade – with 0.07 delta which was beyond 2 SD (standard deviation):
 

At least I thought that it was a safe trade. I was so far away from the market that what could go wrong, right? Well, Donnie went wrong, as usually. What can you expect from a business genius who bankrupts a casino! But what drives me nuts even more is that Americans haven’t learned their lesson the first time. They needed their assess kick once again. So they voted for this moron once again. Will they ever learn? What happened to American that fought Nazism, Fascism, and Communism and today it is embracing it? On the other hand, it is fairly laughable hearing MAGots spitting their rage on socialism (none of them knows what it is) and today crying that their SNAPs were cancelled.

Well, the trade went south fairly quickly:
 

At first, I was contemplating whether to close the trade for a loss or roll it or try to adjust it. Usually, when the markets crash beyond 2 SD, it is a rare event and they may be a bounce. But if we look at what happened during the Orange Era 1.0 the markrets took quite serious hits before they stabilized.

The implementation of tariffs, particularly those targeting China, had notable effects on the U.S. stock market. The initial announcement of tariffs in March 2018 led to a significant market downturn, with the Dow Jones Industrial Average dropping 724 points (approximately 2.9%) due to concerns over a potential trade war. Companies with substantial business in China, such as Caterpillar Inc. and Boeing, experienced considerable declines in their stock prices.

Throughout the trade tensions, investor uncertainty contributed to market volatility. For instance, on December 4, 2018, the Dow Jones fell nearly 600 points, reflecting apprehensions about the escalating trade conflict.

Despite these fluctuations, the overall performance of the stock market during Trump’s first term was strong. The Dow Jones Industrial Average increased from around 20,000 points at the beginning of his term to nearly 31,000 points by the end, marking a substantial rise. The S&P 500 also saw an average annual return of 13.73% during this period, ranking third among presidents since the late 1800s.

In summary, while the introduction of tariffs during Trump’s first term led to periods of heightened market volatility and specific sector downturns, the broader stock market demonstrated resilience and achieved significant gains over the term.

Now, I decided to roll the trade, although I am doubting that move. Maybe, I should have closed the trade instead. Next week will show what the right move to do was. But I am prepared to keep adjusting the trade as long as needed to finish it as a winner or break even trade.

What have I done once the trade crashed through my short strikes? Well, I made three rolls and adjustments. The first two adjustments were just rolls. The first roll was away in time but same strikes. The second roll was another roll away in time but also lower. None of these rolls worked, although I have collected more credit. So I used a third adjustment that I call an “uneven roll.” This roll is to roll only short strikes, add new long strikes, and add more contracts to collect a credit.

So, originally, I had six 0 DTE contracts. After the uneven roll, I now have 16 short puts and 22 long puts. This gives me a hedge should the market continue crashing. I can close the trade for a credit even if the markets smashes through all my strikes.
 

I will have a clearer picture today at 4 pm (MT) when the futures market open and see if we keep crashing or this time the markets priced the tariffs in. Definitely, the ignorant Trump is going to create a significant turmoil and unlike in his first term, he can actually spark a recession. In 2018 when he was imposing tariffs, we didn’t have a fragile economy, high inflation and high interest rates. Today, we have high interest rates and tariffs are inflationary. This may force the FED to stop cutting rates to keep inflation in check. That will be a domino effect. Higher rates and tariffs will eat up profits and that will impact the markets. It almost seems like it is time to go bearish.

It is evident that today the market rejected the rally at the resistance. The bulls battle may still not be lost, we may be experiencing a pause after yesterday’s strong rally. The market bounced from the support line of a declining wedge and rallied hard. Probably too hard. We would prefer an incremental increase over time than what we have seen yesterday:
 

Now, bears have an upper hand. If bulls who bought into the yesterday’s rally join bears, we may see another leg down. However, the chart above is a futures’ chart, if we look at SPY or SPX, we see a gap:
 

It is quite possible that we will go lower to close that gap and bounce up again. The markets had a 4.2% pullback so far so nothing too bad yet. But it may get worse. Definitely, we need to be prepared for the possibility of further decline unless today’s price action was just a pause. We will see tomorrow, however, Friday’s are typically weak days in declin9ing markets, so it is possible that we will go lower.

Dear Partners,

October has been a month of challenges and careful recalibration for our fund. Reflecting on this period, we faced leverage concerns and overtrading issues that tested the resilience of our strategy and brought valuable lessons about liquidity, risk management, and prudence. These experiences echo the words of renowned hedge fund manager Paul Tudor Jones, who cautioned against the dangers of leverage. His insights highlight that leverage, while a powerful tool for amplifying gains, can quickly become a risk if it forces a portfolio into unwanted selling during volatile market conditions.

As Jones emphasized, the main danger of leverage lies in its potential to compel rapid, sometimes unfavorable selling when a portfolio’s capital is stretched thin. His words serve as a powerful reminder that even seasoned managers can find themselves at the mercy of leverage. Reflecting on this, I was reminded of the saying from the Czech Republic: “Fire can be a good servant but a very bad master.” The same is true for leverage. If managed correctly, leverage can serve us well; when overused, it risks taking control of our portfolio.
 

Recognizing the Risk and Course Correction

 
This October, when the market’s volatility surged, and margin calls intensified, we had to face the reality that our use of buying power needed reassessment. Futures options differ from options on stocks or indices in that their buying power requirements fluctuate more frequently, often being marked to market daily. While I initially took the temporary release of buying power as an opportunity to add new positions, this led to a momentary strain on our account when that same BP was swept back unexpectedly due to increased volatility. This experience underscored the need for disciplined BP management, particularly with futures options.

However, a few prudent measures helped us navigate through this volatility. By maintaining cash reserves, we were able to satisfy margin calls without forced liquidations. Recognizing the potential risk early enough allowed us to take immediate steps to stabilize the portfolio.
 

High Volatility’s Role in Portfolio Stress

 
Some of the current portfolio stress has been driven by the unusually high volatility in the market, with certain indicators spiking to levels around 76%. This extreme volatility has been fueled by factors including the election cycle and broader economic uncertainties. While this heightened volatility places temporary strain on the portfolio, we anticipate that stress to ease as volatility declines, particularly after the election. If the election outcome is smooth and uncontested, we expect a decline in market volatility, which would provide relief to our portfolio. However, should the election results be contested, this high volatility—and, with it, portfolio stress—may continue or even intensify in the short term.
 

Implementing New Safeguards

 
As part of our course correction, we established new rules for trade entries. These measures are designed to prevent overexposure and include maintaining a set minimum BP, capping the number of open trades, and ensuring a minimum level of cash reserves. These reserves serve as a buffer to provide flexibility if we encounter heightened volatility, and if used, they are to be rebuilt promptly.

Additionally, we halted redemptions and distributions temporarily to protect the portfolio’s integrity during this period of recalibration. I’m encouraged to report that these adjustments have proven effective. Our buying power is gradually increasing, cash reserves are rebuilding, and our trade count is being managed within set limits. With these risk parameters now in place, we have resumed distributions and redemptions, albeit with continued caution.
 

A Path Forward

 
While we’re not entirely out of the woods, the portfolio is in a much stronger position. October’s events have underscored the value of liquidity and conservative leverage management. Our portfolio has shown resilience under market pressure, with improvements in BP and cash flow. This period has reinforced our approach to mindful trading, and I am confident these adjustments will support long-term stability.

Thank you for your patience and continued trust as we work to create a more robust and resilient portfolio.

With regards,
 

Martin Zourek
Managing Director,
ZZ Capital Management, LLC

Schizofrenia of the American society in full display. Today’s news on Yahoo Finance delivered an article that October retail sales topped estimates in October and September sales reports were revised sharply higher. So the data shows that consumers keep spending and buying (usually what they do not need) like crazy.
 

On the other hand, these same consumers punished Biden-Harris (and Democrats) at the polls blaming them for “high inflation and high prices.”

Dear American consumer, you need to make you mind. You cannot be whining about high prices and then go shopping like crazy.

&nbps;