BY MARK SEBASTIAN
February 25, 2025
Hey Traders,
Monday was a wicked one. The market opened up big out the gate before closing near the lows of the day.
While the close to close move was only .5%, the move intraday was north of 1% – a pretty solidified move.
I am going to break down what happened with yesterday’s trade and lay out what I see for Tuesday.
First, Let’s Recap Yesterday’s Trade
Monday was a challenge.
I was biased long.
After an initial sell of the big morning rally, I was impressed by the market rallying back to green.
Thus when I saw the pull back to VWAP, with option prices low I took the calculated risk that we were going to bounce off VWAP. With fly prices a little funky I went with straight XSP calls.
Unfortunately, VWAP did not provide support for SPX and we closed near lows.
However, while yesterday was a tough day, today provides an opportunity for a successful trade.
…Today’s Outlook
The VIX curve is pointing toward total confusion.
The VIX (the green line) is trading above March and April futures – but the curve itself is in a contango. That is the market telling us VIX could be at 20 or below 16 by Friday.
SPX is at a key level as well:
The index was above the 50 DMA most of the day, but closed below that. If the market doesn’t use that as a bounce pad today, we are going to want to get short.
I anticipate today being a day where markets move more than 1%. My guess is the market opens up, sells off, and THEN makes the big directional decision around noon.
Expect a trade after we see that decision made.
If you’re a member, be sure to join Licia at 10:15 ET – she’ll be looking at the charts and can provide her blueprint for market action today.
Call Ted if you aren’t currently a member – 888 872 3301.
Your Only Option,
Mark Sebastian
Mark Sebastian
Founder & CEO, Option Pit
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