Yo Pit Crazies,
Sometimes I wonder if the Cboe Volatility Index (Ticker: VIX) watches the S&P 500 (Ticker: SPX).
The SPX was down two points Tuesday and VIX was up a full point to just 17.90.
The “fear index” got close to Zone 3!
Oh my gosh, hide the kids! It’s to be Armageddon … or maybe not.
For reference, there are four Vix Zones.
- Zone 1 9-12
- Zone 2 13-17
- Zone 3 18-23
- Zone 4 24 and above
Five-day VIX chart with one-minute candles.
Note that VIX traded well into Zone 2 on Friday … only to pop a bit into the close and dance around Zone 3, above 18.
I’m bringing this up because it’s important when we change zones. That usually means a change in sentiment.
We’re at 17.5 of this writing on Wednesday afternoon, and we’ll see where we go into the close.
I should note that Tuesday also factored in Weekend Effect, since there was the three- Memorial Day weekend. If you want more on the math behind it click here
Ultimately, we’ve seen a little weekend and a little nerves. I won’t look for a lower SPX until we really spike above 18 and hold that level.
The Lesson: VIX Zones are great ways to gauge market sentiment and initiate trades. Check out our Edge Hunter system for help with that.
The Power Moves Portfolio:
Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise. We are aiming for positive theta trades and using that income to buy calls is the big growth opportunity.
Frank is cueing up Bitcoin and he likes the PowerMoves from the US Gov that regulation is more bullish than not. I am looking at Coinbase Inc. (COIN) as a potential upside play. Stay tuned for a Thursday trade!
- Ford Motor Co. (Ticker: F) pulled back a bit, and we will take the money if we don’t see a rally this week.
- General Electric (GE) is a play on green energy. We own two GE Sept. 17 14-strike calls for a credit.
- Cleveland-Cliffs (Ticker: CLF) broke out and way above the strike in my spread so I took the $100 gain and bought a midterm call, one CLF July 16 21-strike call for $1.61. Looking for a double in this call to close.
- Our Vale S.A. (Ticker: VALE) position is back to even with five VALE June 18 22-strike calls that we own. We sold all the puts in here for a 100% return per put. The calls are trading $.83, but unless we get a blast-off and the calls are well in the money, I am in repair mode and will close them for a scratch.
- We own four Taiwan Semiconductor (Ticker: TSM) June 18 120-strike calls for $3.10 and one TSM June 18 100-strike put for $1.95, and have taken in $470 against them via TSM calls we sold and QQQ put spreads we closed. I started to close the June18 120-strike calls at $2.25, selling one, since that is my break even area. There’s too much up-and-down for long calls this close to expiration.
- Palantir (Ticker: PLTR) stock briefly hit $24.75 last week as meme stocks got hot again. I am back to even on the positions, and if I get a move above $25 I will take the win and move on since this position is in repair mode. It’s at $24.48 as of this writing.
To Your Trading Success,