Global Market Comments
March 11, 2025
Fiat Lux
Featured Trade:
(The Mad Hedge March traders & Investors Summit is ON!)
Global Market Comments
March 11, 2025
Fiat Lux
Featured Trade:
(PROSHARES SHORT S&P 500 ETF LEAPS),
(SH), (SPY)
Trade Alert - (SH) – BUY LEAPS
BUY the ProShares S&P 500 ETF LEAPS (SH) August 2025 $41-$42 in-the-money vertical Bull Call debit spread LEAPS at $0.60 or best
If we get any kind of rally over the next few days, you need to add this position, which offers a 66.66% profit in five months.
Opening Trade
3-11-2025
expiration date: August 15, 2025
Number of Contracts = 1 contract
I spent the weekend shopping for downside protection for US equity portfolios, and this is the best one I could find. There are a lot of them designed to do nothing more than pick your pocket, but I think I found a good one.
If the last two weeks have been painful for your long-only portfolio, this is a way to protect it from additional losses. It may also help you sleep better at night. It will also reduce the day-to-day volatility of the net asset value of your account. But like all insurance policies these days, it doesn’t come cheap.
The best thing about this LEAPS is that if we close anywhere above the upper $42 strike price by expiration in five months, you double your money.
Not bad.
Ideally, you will add this position on a day when the stock market is up and the early players are taking profits.
The ProShares S&P 500 (SH) is an inverse ETF that rises in value when the index falls on a one-to-one basis. Its current NAV is $863 million. It makes an excellent hedge for tech-heavy stock portfolios, with a hefty 32.6% exposure to the sector and 7% in Apple (AAPL) alone. If the (SPY) drops by 15% from here by the August 16 option expiration, this fund should rise by 10% to over $46.
I am therefore buying the ProShares Short S&P 500 ETF (SH) August 2025 $41-$42 in-the-money vertical Bull Call spread LEAPS at $0.60 or best.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait for a few hours, and if you don’t get filled, cancel your order and increase your bid by 5 cents with a second order.
This is a bet that ProShares S&P 500 ETF (SH) will not fall below $42 by the August 15, 2025 option expiration in a little more than 5 months.
There is a catch.
Inverse ETFs have their own special problems and are ideally designed to be traded intraday. They are not cheap. There can be tracking errors, although the (SH) has tracked pretty well over time. There is a contango because the fund managers have to borrow money at around a 6% annual interest rate to buy the futures contracts that the fund invests in.
You also have to cover the cost of paying dividends for the S&P 500, now at a 1.2% annualized rate. There is a derivative risk in that the futures contracts that the fund buys, in theory, could default.
You also have a compounding risk because the fund is reset at the end of every day. That means that if the (SPY) goes up and down frequently over a short period of time, the value of the (SH) will fall.
All in all, the S&P 500 has to drop about 5% by August 16 just to cover all of the costs associated with this short position.
I did take a close look at another ETF, the ProShares Ultrashort S&P 500 ETF (SDS), a leveraged -2X short ETF. The problem here is that with twice the short position, you are paying twice the expenses. The borrowing cost goes from 6% to 12% annualized, and the short dividends go from 1.2% to 2.4%. The (SPY) would have to drop a lot just to cover these expenses unless the drop happens immediately.
It’s great for catching short, sharp selloffs. If you bought the (SDS) on February 18 bottom, you would have made a quick 12% profit on a 6% decline in the (SPY). But for a five-month hold, you are giving up the first 12% move to expenses.
To learn more about the (SH) ETF, please visit their website at https://www.proshares.com/our-etfs/leveraged-and-inverse/sh
Don’t pay more than $0.70, or you’ll be chasing on a risk/reward basis.
Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Let’s say the Proshares S&P 500 ETF (SH) August 2025 $41-$42 in-the-money vertical Bull Call debit spread LEAPS are showing a bid/offer spread of $0.40-$0.60. Enter a good-until-cancelled order for one contract at $0.50, another for $0.55, another for $0.60, another for $0.65, and so on. Eventually, you will enter a price that gets filled immediately. That is the real price. Then, enter an order for your full position at that real price.
Notice that the day-to-day volatility of LEAPS prices is miniscule, less than 10%, since the time value is so great, and you have a long position simultaneously offset by a short one.
This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just by entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
Look at the math below, and you will see that no move in (SH) shares over 6 months will generate a 100% profit with this position, such is the wonder of LEAPS. LEAPS stands for Long Term Equity Anticipation Securities.
Here are the specific trades you need to execute this position. You must place an order for this single vertical debit spread.
Buy 1 August 2025 (SH) $41 calls at………….………$5.60
Sell short 1 August 2025 (SH) $42 calls at…………$5.00
Net Cost:………………………….………..……………......$0.60
Potential Profit: $1.00 - $0.60 = $0.40
(1 X 100 X $0.40) = $40 or 6.67% in 5 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here at
https://www.madhedgefundtrader.com/ltt-vbcs/
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually, or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts goes out, prices can be all over the map.
In the burgeoning landscape of artificial intelligence, where massive foundation models (FMs) reign supreme, a new player has emerged, promising to democratize access and accelerate innovation. Together, AI, a startup founded by a team of seasoned AI researchers and engineers, is rapidly gaining traction with its platform designed to simplify the development and deployment of cutting-edge AI models.
At the heart of Together, AI's mission lies a fundamental belief: the power of foundation models should not be confined to a select few with access to vast computational resources. Instead, they envision a future where developers, researchers, and businesses of all sizes can leverage these transformative technologies to build groundbreaking applications.
Bridging the Gap: Simplifying Foundation Model Access
The challenge with FMs, like large language models (LLMs) and diffusion models, is their sheer size and complexity. Training and deploying these models requires significant computational power, specialized expertise, and substantial financial investment, creating a barrier for many. Together, AI aims to dismantle this barrier by offering a unified platform that simplifies the entire lifecycle of working with FMs.
Their platform provides a comprehensive suite of tools and services, including:
- API-driven access to a diverse range of FMs: Together, AI offers a curated selection of state-of-the-art models, including their own open-source models as well as those from leading research labs, accessible through a simple API. This eliminates the need for developers to manage complex infrastructure or navigate the intricacies of model deployment.
- Optimized infrastructure for efficient model execution: The platform leverages a distributed infrastructure optimized for running large-scale AI models, ensuring fast inference speeds and low latency. This allows developers to focus on building applications rather than worrying about infrastructure management.
- Tools for fine-tuning and customizing models: Together, AI recognizes that pre-trained models often need to be adapted to specific tasks and domains. Their platform provides intuitive tools for fine-tuning models with custom datasets, enabling developers to tailor the models to their unique requirements.
- Open source contributions and community focus: Together, AI is deeply committed to open source and actively contributes to the development of open foundation models. They believe in fostering a collaborative community where researchers and developers can share knowledge and contribute to the advancement of AI.
The Power of Open Source: RedPajama and Beyond
One of Together, AI's most notable contributions is the RedPajama project, an initiative to create a fully open-source reproduction of the LLaMA language model. This project exemplifies their commitment to transparency and accessibility in AI.
RedPajama aims to address the concerns surrounding the proprietary nature of many leading LLMs, providing a freely available alternative that can be used for research and development without restrictions. By democratizing access to powerful language models, RedPajama has the potential to accelerate innovation and foster a more open and inclusive AI ecosystem.
Beyond RedPajama, Together, AI is actively involved in other open-source initiatives, contributing to the development of tools and libraries that simplify the use of foundation models. They believe that open collaboration is essential for driving progress in AI and ensuring that the benefits of this technology are widely shared.
Use Cases and Applications: Transforming Industries
The impact of Together, AI's platform is already being felt across a wide range of industries. Developers are using their tools to build innovative applications in areas such as:
- Natural Language Processing (NLP): Building chatbots, text summarization tools, and content generation systems with unprecedented accuracy and fluency.
- Computer Vision: Developing image and video analysis applications, including object detection, image generation, and video editing tools.
- Drug Discovery and Materials Science: Accelerating research by using FMs to analyze complex datasets and predict the properties of new molecules and materials.
- Software Development: Enhancing developer productivity with AI-powered code generation and debugging tools.
- Personalized Education: Creating adaptive learning platforms that tailor educational content to individual student needs.
For instance, a startup developing a customer service chatbot can leverage Together, AI's platform to access a powerful LLM, fine-tune it with their customer support data, and deploy it quickly and easily. Similarly, a research team working on drug discovery can use the platform to analyze vast datasets of chemical compounds and identify potential drug candidates.
The Future of Foundation Models: A Collaborative Vision
Together, AI's vision extends beyond simply providing access to existing models. They are actively working on developing new and more efficient FMs, pushing the boundaries of what is possible with AI.
Their research efforts focus on areas such as:
- Efficient model training and inference: Developing techniques to reduce the computational cost of training and deploying FMs, making them more accessible to a wider range of users.
- Multimodal models: Building models that can process and integrate information from multiple modalities, such as text, images, and audio, enabling more sophisticated and versatile applications.
- Responsible AI: Developing tools and techniques to mitigate the risks associated with FMs, such as bias and misinformation, ensuring that these technologies are used ethically and responsibly.
- Decentralized AI: Exploring the potential of decentralized approaches to training and deploying FMs, creating more robust and resilient AI systems.
They emphasize the importance of collaboration and believe that the future of AI lies in a decentralized and open ecosystem. This vision is reflected in their commitment to open source and their active engagement with the AI research community.
Challenges and Considerations: Navigating the AI Landscape
While Together, AI's platform offers significant advantages, it is important to acknowledge the challenges and considerations associated with the use of foundation models.
- Bias and fairness: FMs can inherit and amplify biases present in their training data, leading to unfair or discriminatory outcomes. Addressing these biases requires careful data curation, model evaluation, and ongoing monitoring.
- Misinformation and misuse: The ability of LLMs to generate realistic and persuasive text raises concerns about the potential for misuse, such as generating fake news or impersonating individuals. Robust safety measures and ethical guidelines are essential to mitigate these risks.
- Computational cost: Even with optimized infrastructure, running large FMs can be computationally expensive. Finding ways to reduce the cost of inference and training is crucial for making these technologies more accessible.
- Data privacy: Training FMs often requires access to large amounts of data, raising concerns about data privacy. Developing privacy-preserving techniques is essential for ensuring that data is used responsibly.
Together, AI is actively addressing these challenges through its research efforts and its commitment to responsible AI practices. They believe that by working together, the AI community can overcome these obstacles and ensure that the benefits of FMs are realized for all.
The Rise of a New AI Paradigm
Together, AI represents a new paradigm in the development and deployment of foundation models. By democratizing access and fostering collaboration, they are empowering developers, researchers, and businesses to build groundbreaking applications that were previously unimaginable.
Their commitment to open source, their focus on efficient infrastructure, and their dedication to responsible AI practices are positioning them as a key player in the rapidly evolving AI landscape. As foundation models continue to advance and become more widely accessible, platforms like Together, AI will play a crucial role in shaping the future of artificial intelligence.
Mad Hedge Technology Letter
March 10, 2025
Fiat Lux
Featured Trade:
(TORPEDO FIRED ON TECH MARKET)
(AAPL), (NVDA), (PLTR)
Torpedoes have been fired on the tech market, so what should you do?
We have suffered some damage, and in the short-term, don’t bet the ranch on a rapid reversal.
Tech’s bellwether stock, Nvidia (NVDA), has cratered from $150 per share and is now closing down at $100 per share.
The selloff is real and unrelenting.
Treasury yields slid on bets that an economic slowdown would force the Federal Reserve to slash interest rates. Bitcoin slipped below $80,000.
The administration said the US economy faces “a period of transition,” deflecting concerns about the risks of a cool down as his early focus on tariffs and federal job cuts causes market turmoil.
President Trump doubled down on the current policy path and acknowledged the chance of “disruption,” all adding up to a letdown in sentiment.
If you thought Monday would give us a small reprieve, think again.
We were hit with another tsunami of selling.
Tesla is down 14% while I speak, and Musk’s political involvement has made this stock untouchable. Apple is down 5%, and Palantir is down over 10%.
In the short-term, it seems as if the administration will speak out every chance they get to push along the tariff policies, and they don’t care about the stock market.
That has to worry investors, and I would advise the street to the sidelines so this can work itself through.
At the end of the day, it is a real worry where that extra incremental dollar will come to help the bottom line of tech companies.
Consumers are getting scared away, and entire countries are on alert for the quickly changing policies.
This type of backdrop is not conducive to an appreciating tech market.
Markets continue to prove sensitive to trade policy, as considerable uncertainty remains over the size and scope of tariffs to be implemented.
The stock selloff in tech has been so pronounced that I think we are through a good chunk of it.
We could rattle around a little and trudge sideways with dips on bad employment and bad consumer numbers.
Americans from all walks of life are cutting back.
A startling statistic shows that over 50% of the spending is done by only the top 1% of Americans, meaning a bigger load is carried by the few.
Indeed, many at the bottom of the economic pyramid have not seen an upturn in fortunes after going through 2001, 2008, 2020, and then the inflation that occurred after that.
It all stinks of a saturated tech market where even institutions are dumping stocks to lock in profits.
The administration appears to have bait and switched us to condition us to rate the yield of interest rates as the ultimate barometer of economic health.
Remember, we have been stuck in this high rates and high price environment in almost every asset class for quite a while.
It appears as if Trump is trying to break this up so that there is more price discovery and a healthier functioning market.
In the short term, watch out below because the prior admin has been blamed for the current selloff, and Trump wants to flush out the system before “saving” it before mid-term elections.
In the short-term, scale back tech positions is the responsible strategy because it is very obvious that the economy is about to weaken, and tech management will need to signal to investors of rapidly shrinking revenue targets.
“Brand is just a perception, and perception will match reality over time.” – Said Elon Musk
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
(WELCOME TO THE WHIPLASH MARKET)
March 10, 2025
Hello everyone
WEEK AHEAD CALENDAR
TUESDAY MARCH 11
6:00 a.m. NFIB Small Business Index (February)
10:00 a.m. JOLTS Job Openings (January)
WEDNESDAY MARCH 12
8:30 a.m. Consumer Price Index (February)
8:30 a.m. Hourly Earnings final (February)
8:30 a.m. Average Workweek final (February)
2:00 p.m. Treasury Budget (February)
THURSDAY MARCH 13
8:30 a.m. Continuing Jobless Claims (03/01)
8:30 a.m. Initial Claims (03/08)
8:30 a.m. Producer Price Index (February)
FRIDAY MARCH 14
8:30 a.m. Michigan Sentiment preliminary (March)
Expiration of Congressional continuing budget resolution from December
Cyclone Alfred has given me a couple of sleepless nights here on the Gold Coast. In my area, there are huge branches and some trees down, powerlines down across roads, traffic lights out, people missing, presumed dead, in raging floodwaters, and major shopping centres closed due to power outages. If this had been a Category 4 or 5, the coast would have been wiped out. The buildings here are not built to withstand that type of ferocity.
It's Sunday morning as I am typing this, and we are still without power. (I’m relying on battery power.) Thursday evening, the power went out, and I have no idea when it will be reconnected. It could be up to a week before we have power again, so it is all about making do.
It’s Monday morning, and at long last, it has stopped raining. 250,000 people are still without power, and I am one of them. In the last 24 hours, Brisbane had its wettest day in 51 years, with 275mm of rain falling.
Since Thursday evening last week, I have been working by torchlight and daylight. Reading books in my downtime. Listening to howling winds and rain belt the roof, windows, and doors, and hoping that the building structure can withstand all the punishment mother nature throws at it.
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So, to the markets. And this week, investors will be looking for some reassurance and clarity about trade and economic growth. And that is going to be difficult to capture, when President Trump keeps changing his mind on the timing of trade tariffs and their extent, and Musk keeps executing his DOGE agenda.
But inflation data out on Wednesday may settle some nerves about the economy. According to economists polled by FactSet, the consumer price index is set to have risen 2.9% on an annual basis, down from 3.0% in the prior report. Core inflation, excluding food and energy prices, is expected to have risen 3.2%, down from 3.3% previously.
The Producer Price Index on Thursday is also expected to have eased to 3.1% year over year, according to FactSet consensus estimates. That’s down from 3.5% previously. Core inflation is expected to have fallen to 3.5% from 3.6%.
But these numbers could go pear-shaped if companies start to pass along higher costs to consumers and inflationary pressures from Trump’s tariffs eventually start to show up in the data. That could be like a big black storm cloud over the market/economy. At the moment, no one is thinking recession. Remember that data is a lagging indicator.
MARKET UPDATE
S&P500
The S&P500 failed to breach the 6000-mark last week. The index has fallen through the 5773 mark, which I marked as a bearish break/the base of a rising wedge. This significant break arguably confirms that the S&P500’s rally from the October 27, 2023, low of 4103.78 is finally over. It would be no surprise to me to see the S&P500 make a sustained break through 5700 this week. I am anticipating a break of 5400 by around mid-April, or even sooner. (That will depend on the whiplash we are getting from Trump’s “change of mind” notions, which seem to happen almost daily now). Investors should use all the rallies to exit equities or to buy put options or (SH) for hedging. S&P500 has multiple supports between 5693 and 5650, so if you want to take profits, do so in a pullback toward 5773 to 5850.
Support =$5655/75 and $5570/95
Resistance =$5775/85/ $5845/55 and $5895/10 areas
GOLD
Gold’s April futures made a new all-time high of 2968.5. Gold closed at 2908.09 on Friday. Most see gold’s movement from the Feb 24th high at $2956 as corrective and believe gold will show eventual new highs after some consolidation. Yes, that’s possible. But there is another point of view here. Gold could continue to show further weakness if it falls and holds below 2845 levels. And the bigger confirmation of a bearish move for gold would be if/when it closes below USD 2700 levels. This down move could continue for many months and may even take gold towards USD 2000-2250 levels. So, with this outlook, you should be looking to book profits in every rally and sell short once the sell signal confirms. The risk reward matrix may have moved away from the buyers. Trade carefully.
Support =$2887/92 and lower down $2857/62
Resistance = $2928/33
BITCOIN
Bitcoin remains lower from the Jan peak at 109.4k. In the big picture view, the downside is seen as corrective and with eventual new highs after. There is potential for further weakness below the Feb. 28th low at 78.2k, although that weakness would likely be short-lived and part of that larger correction. A break/close above the $95.0 area would argue that the large correction since January is complete.
It is important to note that once Bitcoin does reach its $128-$160 target, the coin may possibly fall into a bearish phase, where it could see a level of $32,000 or so. So, after this rally, I would be a seller.
And remember, keep a sell-stop in place at $70 or at a maximum low of $60k, as it could spike down to these levels before it rallies. If it breaks these levels, observe your sell-stops.
Last week, Trump signed an Executive Order relating to the establishment of a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile, as well as the first Crypto Summit at the White House. This marks the first time Bitcoin has been formally recognised as a reserve asset of the United States government and sets a powerful precedent – not just for sovereign entities but also for corporations, financial institutions, and institutional investors.
Support = $78k/$70k
Resistance = $92.5k/$95.0k area
QI CORNER
HISTORY CORNER
SOMETHING TO THINK ABOUT
Cheers
Jacquie