This is a copy (in relevant part) of an Alert that went out last week to Blue Line Trading PRO & Premium subscribers. As you can readily glean from the content, it is equally applicable to all option traders, whether current subscribers to the service or not.
Happy Holidays!
QQQ opened this morning down 2.5%. Consider this 5 minute bar chart a forewarning of what to expect next, whether it be next week, next month and/or next year, as the heart of a multi-year impulse pattern down takes hold: A third wave down at multiple degrees of trend.
Accordingly, it's time to review circuit breakers and the parameters used to shut down trading in the event of severe market declines. Commit to memory, there won't be time to "look it up" as the market hurtles out of control en route to each successive circuit breaker price level.
Market-wide circuit breakers provide for cross-market trading halts during a severe market decline as measured by a single-day decrease in the S&P 500 Index. A cross-market trading halt can be triggered at three circuit breaker thresholds—7% (Level 1), 13% (Level 2), and 20% (Level 3). These triggers are set by the markets at point levels that are calculated daily based on the prior day’s closing price of the S&P 500 Index.
A market decline that triggers a Level 1 or Level 2 circuit breaker before 3:25 p.m. will halt market-wide trading for 15 minutes, while a similar market decline “at or after” 3:25 p.m. will not halt market-wide trading. A market decline that triggers a Level 3 circuit breaker, at any time during the trading day, will halt market-wide trading for the remainder of the trading day.
New Trades
As the decline gains momentum we will be adding special situations, including but not limited to QQQ Puts and VXX-UVXY-VIX calls. In addition, as option positions progress to being deep in the money we will be exiting, banking some profits and rolling the remainder into new strikes and/or expirations, For those who were with us in 2019-2021 we did the same with TSLA calls all the way up from split adjusted mid-$20's in December, 2019, to highs @ $150 in the summer of 2020, then to $290 in January 2021, and finally to over $400 in November 2021. Only that last roll-out did not work out but we had banked enough gains in the prior 18 months to more than compensate for losses, not to mention the original "buy and hold" LEAP of Dec 9, 2019 that was up over 10,000% (Jan 21, 2021 pre-split $420C). The same ride is ahead only this time on a macro level. Stay close to this service.