Closing Out The Week

Hey guys, welcome to another edition of the Magnelibra Markets. Today’s episode #59 is entitled “Closing Out The Week”

Quick Disclaimer: The following podcast is for educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and may not be appropriate for all listeners.

Just wanted to touch upon a couple of items of note first off let’s continue to look at Nvidia and how it is shaping up today, as we noted the options market makers are loving the volatility squash and today are seeing another weaker close below $145 potentially as the Nvidia is down over 3% trading below $142. As far as the daily chart well lets just say its obvious there are sellers at these levels and they are now pushing it below the 21pVWMA:

We know this stock has seen massive appreciation, however as we have noted especially post earnings, the sellers seem to be dominating the flows! So if you have been fortunate to have stayed long this stuff, well it may be a good time to pare down, reduce exposure or put on some downside protection if you want to keep the long but limit downside potential.

Another equity we want to look at is Alphabet or Google, lets just say todays close below the weekly 21pVWMA is a big red flag for us:

As far as the futures markets index wise, well we can see that the SP500 is desperately trying to close above 6000 in the December futures, will it?

The Nasdaq is a bit further away from our 21k resistance area and the weekly formation has cut into last weeks losses pretty well so a bit more balanced on this chart here for next weeks set up. As you know above 21k would see bulls firmly back in control:

Another chart that has us very interested is the Dollar Index, it has been on quite a run and it looks like its closing the week out strong.

Gold is also strong and the December futures is back above $2700 and this weeks performance is a technical stand out reversing the entirety of last weeks loss:

Bitcoin is also flirting with $100k:

So we have the US Dollar stronger, the Gold market stronger and Bitcoin stronger! Safe to say we are at the beginning stages of a fight that has been a long time in the making. Can all three of these markets rise together? Well for now we seem to think so.

Gold is benefitting from geopolitical risk increases, Bitcoin is benefitting from the massive swaps going on by creating US dollar based debt and converting it into Bitcoin and the US Dollar seems to be benefitting from the higher equivalent US interest rate curve.

We did want touch upon MicroStrategy for a minute and discuss what it is they are exactly doing. We know they are converting their capital and issuing super low cost debt to fund Bitcoin purchases. We have also learned that they are selling volatility and trying to extract capital from the markets which from their purview is a way of limiting their actual exposure.

Now what does it mean that MicroStrategy is “Selling Volatility?”

Here are a couple of things we feel they could be doing and we can dig into their SEC disclosures a bit more when the time comes and even their earnings reports to extract some useful data, but for now here are a few items they could be deploying:

• Options Trading: MicroStrategy could sell options contracts, such as calls or puts, on Bitcoin or other cryptocurrencies. This would allow them to profit from the volatility of the underlying asset while also hedging their exposure. For example, they could sell call options on Bitcoin, which would give the buyer the right to purchase Bitcoin at a specified price. If the price of Bitcoin remains stable or falls, MicroStrategy would keep the premium received from selling the option.

• Volatility Swaps: MicroStrategy could enter into volatility swaps with other parties, where they would exchange a fixed payment for a floating payment based on the volatility of Bitcoin. This would allow them to profit from the volatility of Bitcoin while also hedging their exposure.

• Variance Swaps: MicroStrategy could enter into variance swaps with other parties, where they would exchange a fixed payment for a floating payment based on the variance of Bitcoin’s price. This would allow them to profit from the volatility of Bitcoin while also hedging their exposure.

• Futures Contracts: MicroStrategy could sell futures contracts on Bitcoin or other cryptocurrencies. This would allow them to lock in a price for the underlying asset at a future date, which could help them hedge their exposure to price fluctuations.

• Collar Strategies: MicroStrategy could implement a collar strategy, where they would buy a put option and sell a call option on Bitcoin. This would allow them to limit their potential losses if the price of Bitcoin falls, while also capping their potential gains if the price rises.

All in all we plan on digging deeper into all of these possibilities because their overall outperformance and their premium to Bitcoin itself vs their equity, seems way off. We know the stock has been on a massive up move +30% this week alone.

Let’s listen in to Michael Saylor CEO of MicroStrategy talk about this volatility hedging on CNBC via @ Saylor on X today:

Saylor on CNBC talking about Volatility

Ok let’s see how the week finishes out, we leave you with yesterday’s settlements data and the MEGA8s where our option hedge expires today and we will most likely look toward the 510 QQQs for next week, our subscribers will get the daily details as always. You can see this hedge has worked out quite well thus far and we hope you guys are learning something new by going thru these exercises with us:

Ok guys that is it, you can notice above that the futures contract in Gold is this weeks top performer! We hope you guys have a great weekend and we will be back with more over the weekend. We know its Thanksgiving break for many here coming up so we also will probably have a lighter than normal output as we visit with family as well. Thank you for your time, thank you for reading and listening to our work and we hope that you at least like, share or if you can subscribe to our work and support us. We believe we are providing unique data and content and hopefully you continue to learn and refine your own skill sets and mentality! Till next time, Cheers.

DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of or from Magnelibra Capital Advisors. Magnelibra the Commodity Trading Advisory and its proprietary long/short commodities, futures and options managed accounts may hold long and or short positions in the various futures and markets that Magnelibra covers. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed. If you are interested in opening an individual managed futures and options account to compliment your overall investment portfolio you can visit our website at https://magnelibra.com for more information. We are implementing a new trading program launching at the start of the new year, which will include access to Bitcoin futures and options. Please contact or make inquires directly to our introducing broker Capital Trading Group, please contact Nell Sloane at nsloane@capitaltradinggroup.com

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