“Starbucks Indicator” Just Triggered

Don Kaufman here.

I ain't gonna miss another one…

Just this past week, I've had random people I haven't talked to in years calling me about crypto and Ripple.

Then yesterday, two different guys at the gym here on the island stopped me specifically to ask about Bitcoin.

These aren't finance people - one's a government official, Duke educated, smart as hell.

But when people cutting your hair or working out next to you start talking about an asset class, you're about to get screwed.

I've seen this movie before. Time and time and time again.

Back in '98-'99, I was brand new trading in Chicago, standing outside the CBOE getting a sandwich.

Random people in line - not traders, just people who worked in the area - all talking about IPOs. Months later, the market completely collapsed.

Fast forward to 2006-2007. I was running a division at thinkorswim, living between Scottsdale and Chicago. I'd go to this Starbucks in Kierland, and the place was packed with real estate agents writing deals.

Everyone was talking about this heated marketplace. Of course, in hindsight, we know what happened next - the financial crisis absolutely destroyed everything.

This is what I call my "Starbucks indicator." It's completely anecdotal, but it's never been wrong.

And right now?

It's crypto.

You're on the clock at this point.

The Problem with Timing the Top

Here's the thing - could be days, could be a year.

But when you're literally out of your damn mind if you try to actually short crypto outright.

The upside will absolutely kill you. The skew is so wild in there.

When I say take stabs at it, you're going to have to use defined risk positions, like the ones I teach for my in/out strategy.

Go out into products like BITO, buy out-of-the-money put spreads, use risk reversals.

You might have to trade three or four risk reversal spreads before one actually comes to fruition.

The fact of the matter is, we're probably well overdue for a major correction in this marketplace.

I think we're probably on borrowed time.

While Everyone's Gambling on Earnings, Here's the Real Play

Speaking of borrowed time, let's talk about what's happening this week.

Everyone's making directional bets on whether Google and Tesla will beat earnings expectations.

The crowd is positioning for "easy money" from the 85% beat rate and basement-low expectations.

But here's what they're missing: systematic options trading isn't about guessing outcomes. It's about capturing mathematical drift regardless of whether they beat or miss.

For example, my earnings strategy nailed 3 triple-digit winners. Here are more details on how it works.

Now, lets talk about this week's setup.

We've got a $75 expected move on the SPX - that's $30.73 daily. We hit that daily move in the first 26 minutes of trading this morning.

The weekly expected move?

We're almost assured to hit either the upper or lower edge.

In the last two weeks, we didn't hit either edge.

Do we have three consecutive weeks of not hitting the expected move range?

I've only seen that once since 2017.

The Volume Problem Nobody's Talking About

Here's what's really concerning me.

We're making new highs on horrifyingly low volume. We're not even doing 2,000 contracts a minute in the S&P futures. I've personally traded more than that in a single minute when I was working for a firm.

It's insane to see such lack of enthusiasm as we break to new highs.

This entire move has nothing to do with actual share volume - it's 100% the options marketplace driving everything.

Pure call buying creating a gamma squeeze.

But the one thing you can never tell about these squeezes is whether they're sustainable.

We've seen plenty of mornings where you open hot, everyone buys calls, then it just dies out and drifts.

What I'm Watching This Week

Google earnings Wednesday night, Tesla coming up - these are tradeable events, but not because of the fundamental story.

The options flow and expected moves create the real opportunities.

Again, if you want to learn more about how I trade them, click here.

I'm also keeping an eye on the emerging markets trade I put on looking for tariffs to finally matter.

We're just days out from the August 1 deadline, and the market is acting like tariffs don't exist.

That concerns me, because when reality hits, volatility is going to spike hard.

The VIX futures are already pricing much higher volatility 30-60 days out. The market knows something's coming.

The Systematic Advantage

Look, I can tell you right now - when this crypto bubble bursts and when these gamma squeezes finally end, it won't be because of some fundamental analysis or technical indicator.

It'll be because the systematic flows that have been driving everything suddenly reverse.

The beauty of systematic options trading is that you don't need to predict when that happens. You just need to position for the mathematical realities: markets move in ranges, volatility mean-reverts, and expected moves get hit more often than they don't.

While everyone else is making emotional bets on earnings beats and crypto moon shots, the systematic approach keeps grinding out consistent returns.

Action: Set alerts for SPX at 6340 (upper expected move edge) and 6190 (lower edge).

When we approach either level, look for butterfly opportunities on the opposite side.

For crypto exposure, consider BITO put spreads rather than outright shorts.

If you want to trade with me live, join me in the TheoTrade room.

The clock is ticking.

I ain't missing this one.

To your success,

Don Kaufman

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