Don Kaufman here.
My volatility trade should be printing money right now. It's not.
When your position talks to you like that, you better listen.
I've got a volatility structure position on that should be humming along nicely with the S&P at all-time highs. Instead, volatility is sustaining itself and creeping higher.
The position that normally prints cash is barely breaking even.
Your position is your best market intelligence. When it's not doing what it should in the environment it was designed for, pay attention.
It's warning you.
What Friday's Boring Day Really Meant
Friday looked like nothing. The S&P opened here, went up, went down, went like this. Total slopfest. Nobody gave two craps about Friday.
So explain this: We traded 87 million option contracts.
When I was at TD Ameritrade, the highest we ever saw was 35 million contracts during one of the most extreme days in 2014.
Friday was boring as hell, and we nearly tripled that.
Something massive is moving beneath the surface. My volatility position is confirming what the order flow showed: change is coming.
The Real Warning Signal
Late Friday, traders weren't just selling calls. They were buying puts in big tech stocks in a big way. That's not hedging – that's positioning.
When you see put buyers rushing the marketplace while everyone celebrates new highs, you've got a change of foot happening.
My underperforming volatility structure is the technical confirmation.
Balls in the Air
We're juggling now.
NVIDIA takes money from OpenAI, OpenAI spends it at AMD, AMD gaps 30%, and that holds up the entire marketplace.
Financial engineering at its greatest – structured derivatives and money that doesn't even exist perpetuating momentum.
The balls are already in the air. You either keep them up or they all crash down.
What's Coming
Violent pullbacks and rallies back. Violent pullbacks and rallies back.
Let me ask you: If NVIDIA pulled back to 140 right now, are you a buyer?
Most of you just said yes. You'll be a huge buyer at 140 because you know it's going higher. It'll bounce to 160 before dropping to 100. That's the violence coming.
How to Survive
From this point forward, use spreads. You start buying stock, you die.
Use the damn option chains.
Who cares if you're wrong? Lose two bucks on a spread, be wrong. Lose three bucks, be wrong. You're not going to market time this violence.
Want unlimited upside? Great – you also get unlimited downside when volatility structure is screaming trouble.
When my position stops making expected money, when we're trading 87 million contracts on boring days, when put buyers rush big tech – these aren't coincidences.
Your positions talk every day. The question is whether you're listening.
Right now, mine are telling me to spread risk and prepare for violence whether markets go up or down from here.
To your success,
Don Kaufman