Predictions for Friday, October 7th 2022

Quick summary:

• Markets expected to go down this week (compared to Wed
  open)

• Trading SPY condors at 364/365 to 378/379 and SPY put at 378

• Trading DIA condors at 292/293 to 304/305 and DIA put at 304

• Portfolio positioning: same direction for long-shorts, macro remains
  short with hedges (see below, for more on the portfolio set-up see here)

• Watch this tutorial video to see how we trade this and how to
  interpret our predictions:

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Our weekly predictions are here, available exclusively to our subscribers (competition participants get it a day and a half earlier if they leave their email), for Friday, October 7th, 2022 (4pm EST; at market close). Keep in mind that our accuracy is much better for low volatility assets, so interpret the predictions with caution. For an overview of our accuracy thus far, see here.

Our estimate for the Friday close for our 5 major indicators and 2 stocks this week is the following:

An interesting set-up here. After a 5% increase in SPX on Monday and Tuesday (a classic relief rally) we’re looking to end the week lower than yesterday’s open for DJI and SPX. In other words, another short-term reversal from the rally earlier in the week. The sentiment is obviously still bearish, even though expectations of a continued relief rally are certainly significant. The BASON said it won’t continue, let’s see :)

However, volatility is projected to be lower, not higher (lower VIX), which is a bit unusual. AAPL and TSLA are projected to end up close to where they were at the open yesterday, while BTC is projected to keep going up. The 10Y yield is projected to go down.

Yesterday started with a big move down followed by an intraday reversal, but the reversal luckily did not kill our positions.

How did we trade this?

First of all, to remind you of our portfolio approach from now on, our portfolio size is $50,000, meaning that our options positions are now higher, but still make up only 10% of the portfolio (a maximum of $5000 exposure, with a $2500 stop-loss limit).

As per our predictions, this week we're trading  364/365 to 378/379 SPY 07/10 iron condor (25 contracts) for $1200 premium.

The stop loss, i.e. the buy-back is at $1800, if the condor breaks. We are buying a put position, 2 SPY 378 puts 07/10 at $5.7 for which the stop loss is at 50%.

For DIA we are trading the following iron condor: 292/293 to 304/305 DIA 07/10 (25 contracts) for a premium of $925. The stop loss, i.e. the buy-back is at $1690, if the condor breaks. We are also buying 2 DIA 07/10 304 puts for $4.42. Stop loss is at 50%.

For the other part of the portfolio, $20,000 (40%) is allocated towards long-short positions in the following:

• SPY long/short: sold $6250 worth of SPY shares (at $373.8 per share)

• DIA long/short: sold $6250 worth of DIA shares (at $300.2 per share)

• UVXY long/short: sold $7500 worth of UVXY shares (at $11.6 per share)

Macro positioning: short $10k in SPY and $10k in QQQ (no change in
position). A hedge here are $1000 in SPY calls and $1000 in QQQ calls, all with a Jan expiry, all 20% out of the money.

DISCLAIMER: This prediction survey is still in its testing phase. Neither the survey nor its results act as investment advice of any kind, nor should they be considered as such. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum bears no responsibility for your investment choices based on these predictions.

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