This QQQ Rally Is Crazy

Yo Pit Crazies,

 

Crazy is an 8% rally in the Powershares QQQ Trust (Ticker: QQQ) in the last six trading days. 

 

Call me old – well, I am – but I remember back when one year for 8% was not too bad.

 

Now, just six days and you have a year of trading.

 

What to do? QQQ is now up for the last 30 days. Is anything settled?

 

There are Vol Secrets that answer that question.

 

Implied Volatilities in the QQQ Are Getting Too Low

That might sound crazy from a guy who thinks the Cboe Volatility Index (Ticker: VIX) is going to 20, but I closed 80% of my VIX puts on Tuesday.

 

The rally has just been too fierce.

 

I have not been short by any stretch lately, perhaps leaning short VIX, but QQQ back up to a  one-month high seems a bit nutty.

 

So …

 

– Inflation still raging – check

– Rates going up (possibly faster) – check, check

– Russia still causing global mayhem – check, check, check

– US sanctions China – oh, that is a new one

 

The old saying is the market climbs a wall of worry because it is forward looking, not now looking. And I am not one to get in front of a freight train.

 

However … 

 

Vol Man sees a 30% realized vol for QQQ over the last 60 days …

 

That is a one year-high.  Note how the short term IVs in the weeklies are in the mid-20s. That is the opportunity.

 

For Trading Legion, I will price upside in call calendars and downside in straight long puts.

 

The rally is tired, but I will give it some respect. So the trade will do better on a retracement lower but just OK on more rally.

 

If you are in the TL, we will make the trade tomorrow. Everyone else, I’ll share the video of how we did it tomorrow so you can get a taste of how we work.

 

The Rundown

Capitol Gains w/ Frank Gregory

 

My Exxon Mobil Corp (Ticker: XOM) call calendars from last week are running up 20%.

 

Power Income Trader:

Griff opened some QQQ put spreads yesterday. Great minds think alike!

 

Pro Trading Room:
The Pro Room 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 Pro Room was looking at backspread, long gamma trades in Meta Inc (Ticker: FB).  Note the trend in thinking the QQQ move is not done.

 

Nitro Trader:
Option Pit CEO Mark Sebastian uses butterfly and spread strategy for trades that can profit in either direction.

Mark jumped int some cheap Powershares DB Agriculture (Ticker: DBA)   DBA Jan20 20-25-30 call butterflies for 1.40 

Mark is hosting a Nitro Trader event tonight at 8 p.m. ET and he’ll break down how he’s making easy trades for nice wins.

 

Trading Legion:
The Trading Legion is a “next step” trading education program. The goal is to teach students the best times to buy options.

 

Stay tuned for my QQQ trade idea tomorrow.

 

Volatility Edge & Volatility Trading Club:

The Option Pit VIX Light Is Yellow.

 

VTC Trade No. 284 VIXputs for a 50% gain today and will ride my remaining call spreads for a few days to see if the market can hold up.

 

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

Andrew Giovinazzi

Andrew Giovinazzi

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About the Author

Andrew Giovinazzi

Andrew Giovinazzi

Former CBOE floor trader and CIO at Karman Line Capital. Author of ‘The Option Traders Hedge Fund’ with over 30 years of options trading experience.

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