It seems as I write this the VIX is on course for only its second 24+ print of August. (Editor’s Note: VIX closed Monday at 23.80.)

What happened when everything was going so well up to 4300 SPX?

Energy prices happened.

They were the Known Unknown.

The quasi-Green New Deal passed by the Congress in the Inflation Reduction Act is not going to do much for energy prices today.

And that is the problem.

Russia has natural gas and Putin and co. want sanctions eased. By cutting off gas, there is no power to run the German economy since Berlin turned to relying on one source of fossil fuel.  

The unsettled business of the Ukraine invasion and tight energy supplies only got a kick yesterday with OPEC and Saudi Arabia tightening up the spigots. That is adding to volatility and I’m not sure the Fed chair Jerome Powell cares too much about it.

Let’s see what VIX says.

VIX Curve Is Still in Contango!

Contango is a condition where the short end of volatility is trading for lower prices than the long end of volatility.

It also signals an expectation of less volatility in short term and a lack of vol sellers in the long term.

The VIX futures did not get to flat Monday, even with VIX touching Zone 4 around 24.60. That should set up a good binary trade profile, in that stocks selloff because of European energy troubles … or no one cares, the Fed raises 75 basis points and VIX drifts lower again. 

We will see what today brings but it sets up well for a SPY put and VIX put.

I will lay it out in the Volatility Trade Club Tuesday into the close..

The Rundown

Option Shopper

Licia is shopping for cheap vol in Walmart Inc. (Ticker: WMT). She closed  5 Aug. 26 137 puts closed for a 128% gain.  If you want to learn how to use the 1-2 punch of candlesticks and volatility, check out her Option Shopper Program.

Capitol Gains

Canejo Corp (Ticker: CCJ) Aug26/Aug12 22/23.5 put diagonal closed for a 643% gain. That means I sold the trade for much more than the initial credit to enter.

 

To Your Trading Success,

 

AG