Meme + Bitcoin: A Recipe for VIX

Liquidity, liquidity, liquidity.

 

Option Pit’s Bill Griffo will dive in on Thursday (and I’ll be there!), and he thinks we could see a mess related to new gold rules and its impacts on the U.S. dollar.

 

I agree.

 

I’ll give you a taste of it today …

 

Liquidity refreshment, if you will.

 

Just look at what a Bitcoin drop and a meme pop can do to the markets.

 

Liquidity got sapped up.

 

The secret is … there’s only so much to go around.

 

Lost in the Sauce 

 

When you go to McDonald’s, you don’t know what’s in the secret sauce on the Big Mac.

 

They call it a secret sauce because the marketing folks want to keep the Average Joe guessing.

 

When it comes to trading and liquidity, traders are not sure what other institutions, funds or banks are holding. They don’t know what’s in the current Market Sauce, as it were.

 

Right now Bitcoin/crypto and the meme stocks like AMC Entertainment (Ticker: AMC) are causing big dislocations because no one is sure what the leverage is behind these names.

 

Two-week VIX with one-day candles.

 

Note from yesterday, once Bitcoin started falling again and the meme stocks took off, VIX started to rise again in a mostly up market.  

 

Remember: VIX moving in an up equity market is a sign of short term stress.

 

The move could just be temporary, but it is still a move the wrong way for VIX. The issue is uncertainty — and that moved VIX higher, or at least stopped the freefall.

 

A VIX headed to 15 has stopped for now as the market assesses the fallout from BTC rout and the meme pop. (Meme Pop: The Trader’s Cola of Choice!)

 

Look for this liquidity subject on Thursday when Griff ties it all together with Big Daddy Dollar — and gold!

 

Make sure you register to attend!

 

The Lesson: Liquidity in one market can affect the liquidity of another. That’s kind of how liquid works in general.

 

The Rundown

Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Radar to find order flow in active names.

Mark still has the mojo rolling with the tweaks he made to the Robinhood Radar. 

      • Blackberry (Ticker: BB) is still producing, with gains of 113% in Memeland . Wendy’s (Ticker: WEN) popped up in Memeland on the Gamma Radar yesterday, so Mark is looking there.

 

Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.

 

      • Ford (Ticker: F) stalled and I closed all of my long calls.  Looking at 50% returns and more there.  I do have some 13 puts that I will sell some puts against if F drops.
      • I am still riding the Ark Innovation ETF (Ticker: ARKK) strangle with the ARKK June 18 116-strike calls for ARKK to match last week’s highs.

 

Sharp Bets:
Mark Sebastian runs our marquee long option strategy for a once-per-week trade. SB specializes in low-implied volatility calls and puts, and managing trade size for a risk-adjusted options portfolio.

Mark added a buy of Energy Transfer LP (Ticker: ET) July 23 11-strike calls for $.45.  Nice-risk reward here. 

 

Pro Trading Room:
This is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session. 

 

The tone was mostly cautious into Tuesday’s close.

 

Some ideas from around the room:

 

      • Buy WEN July 28-35 call spread for $.95. This trade was closed same day up 58%.
      • STO DraftKings (Ticker: DKNG) Nov. 40/25 puts at $2.15
      • STO  Energy Transfer Partners (Ticker: ET) Jan. 22 9/5 puts. BTO July 23 11-strike calls for a $.05 credit
      • Workhorse (Ticker: WKHS) is getting in on the (meme) party too, I guess.  Traders are  looking at more upside in there.

Volatility Edge/Volatility Trading Club:

The Option Pit VIX Light is still red, and the Cboe S&P 500 9-Day Volatility Index (VIX9D) made COVID-era lows. I am still learning short VIX delta here.

 

Mark closed trade #No. 93 for a 20% and No. 83 for a 35% gain this week. At this point Vol Edge is red and leaning short delta, but he does own a few cheap upside call spreads in VIX.

 

For the Volatility Trading Club, I added a VXX strangle (long a call spread and long a put) in the July 02 cycle, leaning short deltas. I have some puts I can close in VIX June 16 19-strike series, but VIX has just been hanging at the current levels due to the issues I outlined above.

 

Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!

 

To Your Trading Success,

 

AG

The Golden Ticket Against Inflation?

Everyone knows the VIX …


But what they may not know is that the VIX is NOT the only VIX …


There are VIX indexes for the Nasdaq-100 (NDX) … CBOE NASDAQ Volatility Index (VXN) and Nasdaq 100 Volatility Index (VOLQ). 


There are indexes for the Russell 2000 (RUT) and Dow Jones Industrial Average (DJIA) … CBOE Russell 2000 (RVX) and DJIA Volatility (VXD).


There are indexes for currency like the Euro … CBOE EuroCurrency Volatility Index (EVZ).


The VIX index for gold options is the CBOE Gold Volatility Index (GVZ).


One would think SPDR Gold Shares (Ticker: GLD) options would be going crazy with all the inflation talk …


Inflation speculation is all over the place.


Everyone assumes that gold is a good hedge against inflation …


Historically it has been a storage place for wealth for … well, basically as far back as human history goes.


One would think with the fear of inflation blowing up right now, options on GLD would be BLOWING up.


Take a look at the GVZ:



GVZ is sitting just off the lows it touched in May and April…


It appears it might head there again …


So what gives? Why is vol so cheap in GLD?


The answer lies in potentially two places?


  1.  Maybe crypto is the new gold … I mean, take a look at BTC and tell me its an inflation hedge … It is getting punched in the face!


Sure, over the last year, it is up a lot … but in the last month? Not so much.


If you are a believer in the crypto > gold theory you basically are saying BTC overshot the mark …


The other idea is that maybe there is not going to be the inflation explosion everyone expects?


What’s the answer?


I am not sure …


But here is what I do know …


As everyone continues to focus on inflation, gold may be lining up to make some big moves.


New regulations governing the sale and holding of gold derivatives go into place later this month. These regulations could have a HUGE impact on gold prices.


Meanwhile, gold volatility is cheap.


And if the feared inflation blowout does come to fruition? That could compound the situation, and could spell out “danger” for the U.S. Dollar.


The Option Pit Commodities Expert Bill Griffo has been working overtime researching all of this … digging up all the nitty gritty details, and watching all the pieces line up …


We’re convinced this is so important that everyone needs to know about it before it happens.


Bill’s going live tomorrow at 12 pm EST. Register to join him here.


Not only will he give you the scoop on the international plot to overthrow the dollar, and why gold could be ready to skyrocket starting June 28 …


He’s also providing three trade ideas that could help traders in the know actually profit off it all.


But you have to attend to get them.

Your Only Option,


Mark Sebastian

Low Vol, Big Demand In This Commodity

Hey Traders,

Tomorrow is the big day here at Option Pit … Commodities Expert Bill Griffo has some time-sensitive information about how a new Digital Currency Arms Race is threatening to obliterate the dollar …

He has the scoop on an international scheme that could put your hard-earned wealth in imminent danger …

And why precious metals could be getting ready to rocket SKY-HIGH later this month!


He’ll be revealing his top three trades to play it all … but you have to attend to get them!


Register here, the event is LIVE on Thursday at 12pm EST.

And speaking of commodities …

You’ve been hearing me talk about finding ‘pockets of value’ among re-opening stocks … specifically, travel stocks.

Well, as demand for travel rises, what else do you think is also going to see demand go up?

In fact, we’re already seeing it …

As people begin to travel again – whether it be on vacation, or just back to the usual daily commute – we’re seeing a big rebound in oil.

In fact, we’ve already seen a complete oil recovery, with WTI Crude tapping $70 per barrel for the first time in three years!

Chart courtesy StockCharts

Brent crude also reached its highest point since May 2019, indicating the 2020 pandemic stall-out is already in its rear-view …

Oil’s upward trajectory isn’t expected to stop any time soon, with some analysts saying the $100 per barrel mark may be well within reach before we know it.

But … as oil has been rising higher, oil volatility is surprisingly not following suit, having recently settled at low levels, and seemingly determined to stay there.

Take the CBOE Crude Oil Volatility Index, which tracks the implied volatility (IV) of at-the-money strikes for the U.S. Oil Fund ETF (Ticker: USO):

Chart courtesy StockCharts

Similarly, if you take a look at the CBOE Energy Sector ETF Volatility Index (Ticker: VXXLE) you’ll see a similar consolidation at low levels.

So even as black gold works its way higher, oil volatility expectations remain quite muted – on the lower end of what we’ve seen over the last 12 months, if not the lowest, when you’re looking at specific equities, like Exxon Mobil (Ticker: XOM), Marathon Petroleum (Ticker: MPC), Energy Transfer (Ticker: ET), and others, all of whom are sitting in the first percentile of their annual range for ATM 30-day IV.

So we’ve got rising oil prices, and low volatility – what does this mean for us options traders?

That’s right – options are “on sale!” With low volatility priced in, options prices are relatively cheap right now.

And since I expect oil to continue to increase, this means right now is a great time to make a bullish bet.

In fact, yesterday in my Sharp BETS program, I made a trade on oil ticker Energy Transfer (Ticker: ET).

Without giving too much away, I liked the extremely low IV on this name, and the resulting options prices. 

By purchasing calls with a gamma level I liked, I’m hopefully able to set myself up to profit with a relatively small move in the underlying.

There’s plenty of opportunities for oil options players right now. With IV of the whole sector low, many options on oil names are similarly ripe for the picking. Just be sure you are managing your risk to reward ratio, and giving your options enough time to play out.

Your Only Option,

Mark Sebastian


Two-for-One Trades Inside!

Hi Shoppers,

 

Let me show you two charts that I believe are heading into reversals.

 

They are both in the electric car battery business.

 

The first stock is FuelCell Energy (Ticker: FCEL):

 

 

FCEL has traded from $6.42 on May 11 to a high of $12.62 yesterday. I think it’s ready for a pullback, possibly to the $9.50 area.

 

This doji is my indicator of a reversal. Remember a doji is found at the top of an uptrend or at the bottom of a downtrend and signifies a change in sentiment.

 

Looking at the options chain, I would like to buy the June 18 12-strike puts for around $1.15.

 

I will get out of these if they trade down to $.60-$.65. I will begin to take profits $2 and higher.

 

 

The second stock I am looking at is Plug Power (Ticker:PLUG). It’s chart is very similar:

 

 

PLUG has gone from a low of $18.47 on May 11 (same day as FCEL), to a high yesterday of $34.38.

 

It has a doji signifying a possible pullback.

 

I like buying the June 18 33-strike puts for around $1.75.

 

 

I will begin to take profits on these in the $3 area and bail out if they trade down to $1.20.

 

Let’s Review Past Trades

 

      • I sold my Quantumscape (Ticker: QS) June18 26-/31-strike call spread for $2.96 for a 96% profit.
      • In SPDR S&P Oil and Gas (Ticker: XOP), I still have on the June18 95-/100-strike call spread on. It is currently up 49%. I was looking for XOP to trade $100; the high yesterday was $98.61. I will be watching this closely to take my money.
      • My Rocket Companies (Ticker: RKT) June 18 19.50-/29.89-strike call spread is doing well, closing yesterday up 82%. I know you are thinking, why isn’t she taking the money?Looking at the chart, RKT is still looking strong, but I will be watching closely.
      • General Motors (Ticker: GM) was a no go, the stock did not trade lower, so no trade.

 

Exciting time at Profits at Pumps, with wins rolling in and more on the stove.

 

And, of course, don’t forget to join Bill Griffo for his LIVE event tomorrow, “The Digital Currency Arms Race: How You Can Stay Ahead of the International Plot to Kill the US Dollar .”

 

Register here now!

 

Thanks for Reading … See You Next Tuesday!

 

Licia Leslie

Will the European Central Bank Go Bankrupt?

Hey There Income Hunters,


As I’ve been preparing for the Digital Currency Arms Race coming up this Thursday at noon Eastern, I’ve noted one major difference between the Federal Reserve and the European Central Bank. 


The Fed can’t go bankrupt because it can print unlimited amounts of credit to fill any holes in the banking system — something it proved during the Lehman Brothers collapse.


The ECB, on the other hand, doesn’t have that capacity. It’s only tool is the European version of quantitative easing, and lately, as rates have risen dramatically, even that’s not working.


The situation has become so serious that ECB President Christine Lagarde recently doubled the rate of bond buying within the Eurozone to keep rates under control — to little avail.


Lagarde, incidentally, has never struck me as a “market” person. She always seemed more comfortable as a high level politician …


Now, she needs to quickly make some decisions, and the one thing she can do that the Fed can’t, is use gold as a tool for eliminating all the bad debt that is being accumulated.


As for what that means at home, on Thursday, I’ll reveal how far the U.S. has fallen in the rankings of holding “real money” — and I’ll warn you now, it’s startling.


Before that, today, I’ll share the dire situation in Europe, and how events there are setting the stage for an imminent U.S. dollar collapse.


Rising Interest Rates in Europe


Can you believe rates have risen by .50% in Germany and are still negative? Meanwhile, the Germans are buying tons of assets via QE — only come out and warn of elevated financial stability risks.


What do they expect will happen when you pump all that money into the system?


This appears to be getting pretty serious as $7.2 trillion in securities sits on Germany’s balance sheet losing value as rates rise:



Cutting Out the Banks?


It’s becoming increasingly clear that one of the few choices the ECB and Fed have is cutting out banks and moving quickly to launch a digital currency.


The problem is changing a system that has been in place for a hundred years is like turning the Titanic — and we all know how that worked out.


Without the ECB in its corner, however, the Fed will be lost — along with its vision and for a western bloc of nations coming together to launch a digital currency.


The Fed doesn’t have enough gold to use as a tool for devaluing debt, so it has to continue its insane balancing act of just enough inflation to devalue the currency and debt — without losing the confidence of their consumer.


When I look at the situation most central banks face today, I can only come to one conclusion:


Real Money will save the day for everyone and the ones that move the quickest will win.


Bring It Home


The Digital Currency Arms Race is on.


The end game is taking shape and the players are positioning for the winning move …


The clock is ticking and the deadline is approaching. More on that Thursday at noon eastern.


Until then …


Live and Trade With Passion My Friends,


Griff