Would +50% in a month on a single trade work for you?
That’s how one of my latest X-mas Tree trades did, even when the market wasn’t working against me.
Can you imagine what that might look like when things are actually in your favor?
Click Here to see the strategy behind my X-mas tree trades.
Don here...
I pulled up the S&P chart this morning and started counting. How many times have we rallied on news about a China trade framework?
April. That was the first one.
May. Another bounce. Framework discussions moving forward.
July. Rally number three.
Today. Gap open on the exact same headline.
That's four times this year we've traded higher on virtually identical news. I asked the room to help me count because honestly I lost track.
Some people said we could go back a decade and find the same pattern repeating. But let's just stick with 2025 for now.
Four times. Same story. Same reaction.
But here's what stopped me cold this morning.
I closed a X-mas tree spread trade at 8:30 AM that should have been more profitable, not that a 53% gain was too shabby.
But here’s the thing…I had sold puts 81 days out as part of the setup.
The market rallied 100 points over the past few days. Those puts should have gotten crushed.
Time decay should have accelerated. Volatility compressed. Instead they barely moved.
Someone is buying protection way out in time. The VIX came down. Skew elevated.
But those back month puts are holding value like something bad is coming.
When your winners don't win as fast as they should, that's the market telling you something.
In today's free session replay, you'll discover:
- The S&P opened 1.5 standard deviations above its expected move. Should have moved $47. Opened up $62. That happens 5% of the time. Outlier moves don't sustain without conviction.
- Volume data proves this rally happened on no real participation. S&P futures averaged 3,000 contracts per minute. Gold did 163,000 overnight. Real moves show up in real volume.
- Three stocks held the entire market together. Tesla. Meta. Nvidia. Those three carried a 60-handle S&P rally. Advance decline line neutral. This was AI doing its thing alone.
- Gold broke $4,000 in a pure gamma squeeze. GLD options traded three times normal volume. The options market is leading the physical futures. That's leverage creating price, not demand.
- Retail traders destroy themselves at round numbers. Gold hit $4,000 and triggered every stop within 50 points. Never base risk management around psychological levels. That's how you get picked off.
- Why an 8-to-1 risk-reward trade makes sense at extreme extensions. I placed an XSP spread live costing 58 cents that could make $4.50. You only need to be right once a week on setups like that.
The Chinese stocks rallied despite both Baidu and Alibaba recently saying they're manufacturing their own chips. A deal that relies on chip sales to companies not buying chips sent those stocks up 2-5%.
But it did.
Because the market doesn't care about logic right now. It cares about permission to buy.
Most people think they need to predict the exact turn. You don't.
You need to execute repeatedly with proper structure and let probability work over multiple occurrences.
The lululemon story made me laugh. They just signed a deal with the NFL.
Are they going to sell NFL merchandise in their stores? Or are they putting team logos on yoga pants? I couldn't find the answer anywhere.
But the stock hit the upper edge of its weekly expected move on the news.
Tesla got a bid. Apple finally woke up after being flat all year. Amazon turned positive.
Microsoft found some life. All the laggards suddenly participating in a single morning.
That's rotation. That's the market deciding it's time to buy things that haven't worked instead of things that have.
The session also covered why GameStop and other meme stocks are starting to show signs of life again. Why Qualcomm exploded on news.
Why the advance decline line stayed neutral despite the S&P making new highs.
Today was a masterclass in reading what's actually happening beneath surface-level price action. Contract size tells you conviction. Volume tells you participation.
Sector rotation tells you where money is actually flowing.
And sometimes the options you sold weeks ago tell you more about forward expectations than any headline or chart pattern ever could.
→ Watch today's free session to see how to read market structure when price action and internals don't match
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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