LandMines
They’re hidden beneath the surface. When tripped, they cause a lot of damage, and usually it’s a surprise to the one who treads upon it.
I use the analogy of LandMines in the sense that sometimes I place a series of short options in a sequence in front of where it looks like it’s inevitable that a price path will follow.
This tactic can come in to play when my overall position seems to have a bias against what is currently going on. For example, lets say I have an overall delta on my QQQ options that is negative. That would mean that I am currently in a “Short” position against the Nasdaq 100.
Being short the tech index can be something of an experience. Back in 2023 when I was doing my initial short position training against QQQ I learned it can be a battle to maintain it. The NASDAQ100 went on a tear that year after being dragged through the mud through most of 2022. My decision to use that period to learn about shorting the market resulted in some short term pain, but long term education.
At this time, QQQ (The NASDAQ100) is enjoying a pretty bullish ride. Here’s a 3 year chart just to show how much of a bull run it’s been on.
Why would I want to be “Short” an index like this? It’s all about hedging, and sometimes I’m hedging the short side, and sometimes the long side needs a little hedging. This is where the LandMine comes in. In this screen capture of a part of the Slinky Map for QQQ it shows the positions for October 5th through 9th. The closing price Friday on the QQQ was $749.50 which is above my short calls for the end of the week which are sort of bunched up, but I can say they’re $745 and $746. On those positions, I am ITM, and short, which means those positions are bleeding and in a losing position. If the Qs stay at a higher price for the week, then these will eventually be pressured, and be closed for a loss, and rolled to new positions down the road.
Back to why the LandMine is important. I’ve strategically placed several land mines throughout the week. A double dot means there’s two on that date, and a triple dot means there’s three on that date and strike. There’s a lot of mines laid in the coming week, and depending on the pathway the price takes, it either blows up in my face, or in the pathway of the index.
What Happens Next?
Let’s take a close look at Monday October 5th to break down what happens as the price marches forward.
When Monday opens up I have no idea where the market will take us. It could drop, surge, or stay relatively flat. Nobody knows for sure. I haven’t mentioned it yet, but I will now. We’ve talked about all the “Mines” that have been laid, I want to mention the “MineSweeper” sitting at $751C. This is a position meant to help me make sure the LandMines don’t blow up in my face, and if they do, the Double Short Call position at $751C helps to conceal the damage.
It’s difficult to see, but Monday has a packed showdown of positions we’re going to roll out and deploy to new positions depending on the action that takes place. Here’s what’s on the table to start the week and how I plan to deal with it.
Oct5$746Px2 – The Breakeven on this is at $740. This “LandMine” stays profitable as long as QQQ stays above $740 and becomes 100% profitable if the price is above $746.
Oct5$747Px2 – The B.E. on this is at $744.90 because it was sold later than the $746 and for less premium. Still, it’s looking pretty good so far.
Oct5$751Px2 – This is a direct assault on the MineSweeper. It was placed Friday with the sole intention of having it protect the MineSweeper. If the QQQ want’s to threaten my short position at $751C, then this LandMine placed above the surface is going to make the market pay. Not only that, the other 4 LandMines will be 100% profitable.
Outcome Scenarios
Market Moves UP – If the market moves up, then the LandMines are all profitable. If it moves up a lot, then the MineSweeper could be in trouble, and I roll it forward maybe 1 day, maybe 2 and try to keep it a couple dollars OTM (out of the money). At the same time, I move the $751P LandMine forward with the MineSweeper, and either keep the $751P price, or move it according to the price.
Market Moves Flat – If the market stays relatively flat, +/- $2 Then all positions basically are wins. The $751P is the only position that comes out flat, and I just roll it ahead 1 or two days.
Market Moves DOWN – If the market drops a bit, then the MineSweeper comes out the 100% winner. The LandMines do their job if the price doesn’t plunge hard. If there is a plunge, then these LandMines have to be moved out possibly 2 or 3 days, or possibly 14 days to what I refer to as the “TargetWeek.”
The reason all of these outcomes bring favor is because right now, my QQQ position overall because of future dated contracts is “Short the Market“.
Did you see the movie “Tenet” by Christopher Nolan? That was a mind blowing movie about time moving in two different directions for different characters. The more I tried to make sense of it, the more my brain hurt.
When I am short the market though, I have learned how to treat the situation like passing through the Turnstile in Tenet.
How this parallels what I am doing is equally as brain-injuring as trying to figure out the movie. All I know is, it works. It’s dangerous, yes, but it works.
Medium to Long range, yes, I am “Short the QQQ” but all it takes sometimes is for the Bulls and the Bears to cross paths in the Turnstile, and suddenly the roles are switched. Price drops hard, and now instead of being concerned about being short, things flip the other way.
Rather than being worried about how much damage being short will cause me in the medium term, I instead take advantage of that and place LandMines in the pathway of the QQQ. If it choses to keep causing me medium term stress on the short side, I am going to make it pay for the long side. It’s going to spit out cash like an ATM on payday. If for some reason, there is a reversal, then I simply flip the battlefield, and turn the short calls into LandMines, and the short puts become the MineSweepers.
It takes patience because when we’re zoomed in on the timeline, the ups and downs seem more dramatic than they really are. Patience has always been the first core “Tenet” of my trading philosophy, and long term, it’s the most important one. We have to keep in view the plot of the overall timeline. These factors are at play right now, and I feel like they’re going to keep the market subdued but also ready to breakout depending on how things develop.
- Midterm elections are looming in the US. Democrats appear to be likely to take back the house which ironically helps the market to have some grid lock there. If they take both the house and the senate, things could be more difficult for the market as they create a “Lame Duck President”, but the odds on that are a little lower, and we never know what to expect from Trump. He’s the true wild card in all of this.
- September usually is a bit of a swoon, especially in mid-term election years, but this year it wasn’t much of that at all. Perhaps we have a Halloween Hangover, and October could be primed for a pullback.
- The US/Iran conflict has dragged on far too long, but any time it looks like it might be ending, the market spikes. We have to be mentally prepared for that possibility. It seems the world has been able to figure out how to get oil out of that area anyway, and it’s been running at about 77% capacity lately, but with a high price tag we all see at the pumps.
- AI continues to be a hot and controversial topic. Much of the market is being propped up by AI. Now that Trump has come out to obviously support it with all he’s got, the other party takes the opposite position, and opposes it with everything they’ve got. This just keeps the show interesting, but we’ve got to be ready for a possible major pullback in AI related stocks if the democrats gain power in both house and senate and decide to push back on all these AI companies.
Where does it go from here then? I don’t know. I never know. This is the whole reason we Slinky, and why there’s always two opposing Slinkys. One will always win, and the other might lose, might win, but never ever can both Slinkys lose at the same time. It’s just not possible. Just like passing through time in both a forward, and reverse direction is not possible at the same time, so it is with the Slinky. By design, it can never go 0-2. It can go 2-0 (undefeated) or 1-1 (tied) but never 0-2.
Stay tuned for some follow up results on the LandMines and MineSweeper story. I will come back and update daily on how these positions progress through time.
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