A Full Overview of My September 17 Trades: Deleveraging FNGU, Closing TMF Calls, and Executing a Vertical Spread for Risk Control

Yesterday, I made several strategic moves in my portfolio: I closed out my FNGU ETN position, sold my TMF February 2025 $50 calls, and initiated a TMF Vertical Spread expiring in October 2024. All of these decisions were part of a broader strategy to deleverage and reduce risk, given the volatility and uncertainty leading up to today’s Fed rate decision.

In this environment, holding any kind of leverage, especially through options, presents a higher degree of risk. I wanted to exit leveraged positions ahead of the Fed’s announcement and wait for the market’s response before making further decisions. Here's a breakdown of my actions and rationale.

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First up, I closed my FNGU position. As you may recall, I bought 20 shares of FNGU at $363 per share on September 6, 2024, for a total of $7,260.00. Yesterday, with tech stocks rallying, I decided it was time to exit. I sold 20 shares at $396.50 per share, amounting to $7,930.00.

Profit from FNGU: This trade yielded a total profit of $670.00, representing a 9.23% gain.

I chose to sell FNGU primarily to deleverage. FNGU is a 3x leveraged ETF tied to tech stocks, and in a market like this, the swings can be extreme. Given the uncertainty around today’s FOMC meeting, I didn’t want to hold such a volatile position. Whether the Fed cuts rates by 25 bps or 50 bps, the market could react strongly, and the risk of holding a leveraged ETF like FNGU was too high. Locking in profits before the announcement was the safer move.

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In addition to selling FNGU, I also closed out my TMF February 2025 $50 calls. I had bought 10 contracts at $12.65 per contract on August 14, 2024, for a total of $12,650.00. With TMF rising, I sold these 10 contracts at $15.75 per contract on September 17, for a total of $15,750.00.

Profit from TMF Calls (after adjusting for earlier losses): While the sale initially resulted in a $3,100.00 gain, I had to account for a $1,430.00 loss from closing the short leg of my diagonal call earlier. After this adjustment, my net profit was $1,670.00, representing a 13.2% gain on my original investment.

Here, the decision to close the TMF call options wasn’t just about TMF itself but about removing additional leverage. TMF is already a 3x leveraged ETF tied to TLT, and holding call options on top of that further amplifies volatility. The options essentially increase my exposure to the already leveraged ETF, which significantly magnifies the swings in both directions. Given the current market uncertainty, holding this much leverage—both from the underlying ETF and the options—wasn’t something I was comfortable with going into the FOMC announcement.

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Setting Up the TMF Vertical Spread: A Low-Risk Premium Play
Once I closed FNGU and the TMF calls, I still wanted some exposure to TMF but with minimal risk. To achieve this, I set up a TMF Vertical Spread expiring on October 11, 2024, with a $50 buy strike and a $60 sell strike. I executed the spread at $1.10 per contract, collecting a total of $1,100.00 in premium for 10 contracts.

This Vertical Spread allows me to collect premium while limiting my downside risk. Even if TMF pulls back, I don’t expect it to drop below $60 in the near term, and if it does, I can always roll over the position into future months. This is a low-risk strategy that fits well within the rate-cut environment, where bonds like TMF should generally rise.

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My View on the Fed's Rate Cut: Expecting a Market Drop on a 50 bps Cut
Now let me share my view on today’s Fed rate decision. Although the outcome isn’t certain, I believe that the bond market has already priced in a 50 bps cut, while the stock market has not yet fully reacted to this expectation.

In my opinion, a 50 bps rate cut could lead to a market drop, particularly in the stock market. Why? A larger-than-expected rate cut could signal that the Fed sees more underlying economic problems than initially thought, which could cause investors to become anxious. While the bond market may have already anticipated this move, the stock market is likely waiting for the official announcement before adjusting. This makes the stock market’s reaction unpredictable—whether it will surge or decline is still unclear.

In such an environment, holding leveraged positions, like TMF options and FNGU, presents far too much risk. That’s why I chose to deleverage ahead of the announcement and wait for the market to reveal its hand before making any new moves.

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Total Profit from My September 17 Trades
Here’s the final breakdown of profits from yesterday’s trades:
FNGU Trade: +$670.00
TMF Calls Trade: +$1,670.00 (after adjusting for the earlier $1,430 loss)
TMF Vertical Spread Premium: +$1,100.00
Total Profit: $3,440.00

The focus of yesterday’s trades was on locking in profits, reducing leverage, and positioning myself to ride out the volatility of today’s FOMC decision. By removing leverage from both FNGU and TMF options, I’ve limited my exposure while maintaining a low-risk position through the TMF Vertical Spread.

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The core strategy here is deleveraging in the face of uncertain market conditions. I’ve chosen to lock in profits, reduce my risk, and remain flexible as we await the Fed’s decision. By trading options on leveraged ETFs, I was adding significant volatility to my portfolio—something I wanted to eliminate before a major market event like today’s rate cut.

As always, the goal is to manage risk, generate premium income, and keep myself in a position where I can react to the market's next move. If you found this helpful, don’t forget to like and follow for more updates on my trades and market insights.