Yo, Pit Crazies,

Conditional trading involves understanding what’s going on in the markets.

That way, when a trader sees a cycle in the market that is repeatable, they can trade that cycle.  

That’s one of the many advantages for members at Option Pit – the opportunity to learn how to identify conditions and trade around them.  

Speaking of conditions – hoo boy.

VIX went hyperactive on Friday with the news of Silicon Valley Bank Corp (Ticker: SIVB) going belly-up.

I talked about this Friday and I have to say the collapse of a bank with so much Silicon Valley money in it is … surprising. 

Another Madoff ponzi scheme? I think it is more of an Enron moment than a Lehman moment. That means more name-specific than systemic.

VIX peaked at 29, which is a high for 2023. Nothing like a bank run to get the vol juices flowing!

The question is: did Friday see peak vol or not?

That is the question I answer below … 

VVIX Made a Parabolic One-Day Move

VVIX, as a reminder, is the volatility of the VIX. It made a one year high this week. When that happens, demand for options goes off the hook as investors bet on SPX moving hard one way or the other.  

VVIX

The push-and-pull of the market drives demand for options in both directions. VVIX peaked at 125% Friday and dropped to 108% by the close. While that is a substantial drop, it’s still very high net result.

Now, here is the thing, VVIX not holding is not bullish VIX. Note in the chart above that peaks in VVIX when not sustained drop back quickly. 

I would expect the new gas on the fire will keep VIX elevated to the CPI number, but it will start a longer decline after that. SPX will probably be back to 4000 by Friday.

On a day like Friday, Option Pit does better than most. When I buy options, the most important thing is to book the wins. See below …

The Rundown

Nitro Trader

Invesco QQQ Trust ETF (Ticker: QQQ), SPDR Dow Jones Industrial ETF (Ticker: DIA) Mar10/Mar17 290/285/280 put butterfly, 330 calls closed for a 73% gain.

ARK Funds ARK Innovation ETF (Ticker: ARKK), SPY Mar17 37.5 puts, 400/410/420 call butterfly closed for a 35% gain.

Option Shopper

Transocean Inc. (Ticker: RIG) Mar24 7.5 puts closed for a 89% gain.

OP Mentoring

SPRR S&P 500 Trust ETF (Ticker: SPY) Mar15/Mar10 392 put calendar, 404 calls closed for an 8% gain.

VIX Mar22 21 puts, 24/30 call vertical spread closed for a 160% gain.

Easy Button

Alphabet Inc (Ticker: GOOGL) Mar17 87/95 strangle closed for a 14% gain.

Big Money Flow

Medical Properties Trust, Inc (Ticker: MPW) Apr06 10.5 puts closed for a 60% gain.

Trading Desk

VIX, SPY Mar17/Apr19 21/31 call vertical spread, 407/417 call vertical spread closed for a 55% gain.

To Your Trading Success,

AG