Turning To Black Gold During A Red Light

The Option Pit VIX Light Is Red, and Volatility Is Likely to Drop.


Hey Traders,


While the S&P 500 (Ticker: SPX) has moved up and down a lot over the past month, the net price of the index has remained relatively flat.


One-month SPX chart, courtesy StockCharts


But inside the index, there have been pockets where one can do really well trading cheap implied volatility (IV).


Going through the movers and the shakers, I have found what I think are the most underpriced options in the entire S&P 500!


Let me explain what I am seeing, and how to play it …


WTI crude oil broke $70 a barrel on Monday.


One would think this would be big news, and traders would be buying up options …


One would think, but take a look at the CBOE Crude Oil Volatility Index (Ticker: OVX):



With oil near a more-than-two-year high, options on United States Oil Fund (Ticker: USO) and WTI are dirt cheap.


The same holds true for Energy Select Sector SPDR Fund (Ticker: XLE).


Take a look at CBOE Energy Sector ETF Volatility Index (Ticker: VXXLE), the VIX of XLE options:



Premium on XLE, and thus its components, is near the low for the year …


Right as these names are really starting to break out.


Knowing that the premium is cheap, I want to own call options on the energy names I like …


I am liking long calls in Exxon Mobil (Ticker: XOM), Chevron (Ticker: CVX), Marathon Oil (Ticker: MRO), and Energy Transfer (Ticker: ET).


ET in particular looks like it might be heading for a breakout over the coming days … I am looking for a new 52-week high in that one …


Just as the options are near the cheapest they have been all year.


The VIX Light remains red.


Your Only Option,

Mark Sebastian

The Great Crypto Slide

Hey Influence Traders,

I hope that you had a fun and meaningful Memorial Day Weekend.

The family and I spent it with good friends.

As we hop into a short week, let me remind you one more time to join Mark Sebastian LIVE today at Noon EST today as he turns on the “Money Printing Machine.

Mark is already racking up gains — 63% in less than 24 hours last week — thanks to an overlooked shift in an obscure equity, and he’s releasing three ALL-NEW trades today.

 

But understand this — these trades are EXCLUSIVE, and there’s only one way to get them.

 

Find out how when you click here.

Weekend Winner

Brazilian race car driver Helio Castroneves won the Indianapolis 500. It’s his fourth victory at the Brickyard. (He’s also the 2007 Season 5 “Dancing With the Stars” champion. It’s sort of like being a D.C. AND Wall Street insider.)

Weekend Loser

Bitcoin, which finished May with one of its largest declines on record.

It’s down more than 35% at the time of this writing — to $36,840.

Has Bitcoin Run Its Course?

In short, no.

I’m still a believer — and you should be, too.

Bitcoin is a volatile trade and it’s going through a turbulent period — like it has done numerous times before.

There are some valid reasons why bitcoin faced pricing pressure in May:

      • Regulators in the U.S. and abroad voiced concerns that bitcoin could face increased regulatory oversight.
      • Federal Reserve Chairman Jerome Powell indicated that the Fed could create its own digital currency.
      • The IRS said cryptocurrency transfers over $10,000 need to be reported. 
      • Treasury Sec. Gary Gensler said that he is concerned over crypto and that they should be regulated more like the NYSE or the NASDAQ.
      • Chinese regulators took steps to limit the use of cryptocurrencies, including announcing plans to crack down on bitcoin mining.
      • A Chinese banking association warned its members to refrain from transacting in digital currencies.
      • China is also working on its own digital currency, the digital yuan. 
      • Tesla (Ticker: TSLA) reversed course and said that it would no longer accept bitcoin as payment for its vehicles, citing environmental concerns with mining.

Impact

While these are valid issues and will cause increased short-term volatility, the long-term outlook for bitcoin is strong.

Bitcoin is a store of value like other commodities and is attractive because of its limited (21 million coin) supply.

The granddaddy of crypto has been around for more than a decade. but its mass adoption has been slow — and it won’t pick up real steam until more institutions jump on the bitcoin train.

Look what happened after MicroStrategy Inc. (Ticker: MSTR) invested $2.2 billion in bitcoin and TSLA put $1.5 billion in …

Bitcoin exploded as people flocked in and drove the price up to nearly $65,000 a coin.

But for more institutions to feel comfortable getting on board, some oversight will be needed, so I don’t view recent comments by regulators as worrisome.

Big institutions like smooth-running, properly functioning exchanges that they can trust with large transactions.

They also are under pressure to address know-your-client and anti-money-laundering issues. Those have been a concern for bitcoin that some level of regulation or lawmaking could alleviate.

The IRS can always cause problems if they tax bitcoin transactions, because doing so will discourage people from using the coins in such a manner.

But my sources tell me that proposals on the Hill to exempt crypto transactions below certain dollar thresholds from taxation are gaining traction.

And, finally, what if central banks launch their own currencies? Well, that’s just more competition from other coins that will also give people the confidence to adopt crypto in their daily lives.

They are not bitcoin killers.

Cutting Through the Noise for You.

Frank

 

’21 Bonnie and Clyde

Hey There Income Hunters,


Before I get started, let me tell you this …


The MOST important thing you can do to make money trading this week is to attend Mark Sebastian’s live event today where he will turn on the “Money Printing Machine.”


Mark has literally waited three years for a rare shift in a little regarded equity — and it FINALLY happened last week!


Now he’s absolutely ready to unload, and he already locked in a gain of 63% last Friday … in less than 24 hours.


So today — again, that’s TODAY — at noon EST, Mark will go live and release THREE more trades based on this long-awaited market change.


But there’s one more thing you should know about this event and you can only find out what it is by clicking here. 


*****

OK, here we go …

I knew it was just a matter of time.

Federal Reserve Chairman Jerome “J-Pow” Powell and Treasury Secretary Janet Yellen have created a new way to keep expanding the money supply, and I gotta say …

I like it!

It’s a Wild West approach I would have never imagined this couple could pull-off. I mean, just check’em out …

Wow, those two look pretty scary!

What’s really scary is that they can be so transparent in their approach to rob Americans — while thinking we won’t figure it out.

But by creating all this new cash through quantitative easing (QE) and then holding onto the excess instead of turning off the faucet, it’s just another sign of how serious they are about pouring gasoline on the inflation fire.

I’ll take you through the process AND give you trade for this week to capitalize on their gun-slinging antics.

Money Guns A-Blazin’

Well, since I first alerted you that banks are overstuffed with cash, the amount of excess money the Fed is taking in rose from $350 billion to $500 billion … 

Our central bank is turning into the Hotel California, and just wait, when they launch digital dollars, they’ll be singing, You can check out any time you’d like / But you can never leave.

The Fed, I fear, will eventually control everything we do with our money — that is not an overstatement!

Now, I get it, officials believe they are saving us from the economic devastation caused by the pandemic.

However, they are doing it at the cost of completely crushing U.S. monetary policy. 

The funny thing is, no one will call them out on it — because should they stop, the markets would almost certainly crash and we would transform into a zombie economy for years.

The Greatest Money Grab in History

The graph below represents the amount of cash held at the Fed via the agency’s reverse repo facility (RRP).

RRP is simply quantitative easing (QE) in reverse. Approved investors and banks deposit money at the Fed, and the Fed temporarily sells them Treasury securities.

As you can see, there is currently an all-time-high amount of cash being held via RRP.

Now let’s put QE and RRP together …

The Bonnie & Clyde Show

You may be familiar with what I call the “Bermuda Triangle” by now. That’s the black hole of quantitative easing (QE), in which the Fed buys Treasury securities from the banks, then credits the banks’ accounts at the Fed with the proceeds.

The diagram below shows the complete QE process. Banks buy Treasury bonds through the Treasury auction process, then sell the bonds to the Fed when QE is executed.

QE helps the Fed keep interest rates on Treasury securities low. But when the supplementary leverage ratio (SLR), which is a capital charge on bank assets, was reinstated earlier this year, bank's capacity for QE was reduced.

In response, the next step for Janet Yellen was to inject Treasury funds held at the Fed into the economy. This increased the excess cash held by investors — but banks could not take the cash without putting rates into negative territory …

That’s where the Fed RRP facility comes in, soaking up excess cash while keeping rates above zero.

Ultimately, all that allows the Fed to keep printing money to support the markets until digital dollars are ready to go — at which point the Fed can cut out the banks and have all Amercian’s come directly through them for monetary usage.

I think we are closer to that day than many realize.

Trade This Week

Cboe Volatility Index (Ticker: VIX) & SPDR S&P 500 ETF Trust (Ticker: SPY)

We have entered June in the perfect storm — jobs report out on Friday, followed by bond auction and consumer price index (CPI) announcements.

And this month the jobs report will not disappoint the way it did in May.

Check how it went last month (red circles aboce). Vol comes in even lower now, and we’re looking at low risk/high reward play for June.

The nice thing is that it presents a two-way play …

Catch the short-term play into next week and then reverse the trade coming out.

That’s my plan.

Have a question about that? Drop a comment below.

Bring It Home

The Fed continues to show us the pedal is to the metal on inflation. Officials are biding time until they can find a way to get money directly into our pockets.

I have no doubt they’ll succeed

These next couple of weeks present an opportunity to play for some volatility and then play it back down again… 

There are some nice pair trades I’m looking at and will share them at Wednesday morning's Power Income LIVE. Be on the lookout for a link later today and be sure to join me!

Until Then …

Live and Trade With Passion My Friends, 

Griff