Yo, Pit Crazies,
Pardon my French, but …
Damn, it is cold out.
I went for a walk on Saturday morning and my cove is an ice rink.
The good news is, it’s only 3 months until I launch the dock and summer gets underway. For now, it’s just the clams getting nice and fat for springtime when the clammers come back and ply their trade.
While the winter is cold, the market is off to its hottest start in forever, with the Invesco QQQ Trust (Ticker: QQQ) up 15% this year.
The big question is will it last? Find out when you click here.
A New Vol Regime Is Coming to Town
There are still a lot of questions about the rally holding, but I am sticking with the thesis I have had since mid-January: The animal spirits are back. (That is when folks buy stocks because they think things are happening.)
IV radically repriced lower in the month of January. I take that to mean traders think the IV shocks of the Fed rate hikes are over for the short term.
The issue now is valuation.
Big Tech had crap earnings and outlooks but that did not stop investors bidding up multiples this week as everyone got in.
Apple Inc (Ticker: AAPL) reported its biggest earnings miss since 2016 and it closed up on the day in a down market.
The new Vol Regime means a more “normal” realized volatility instead of the crazy 24% 90-day realized we have been seeing as a result of Fed uncertainty.
Traders are feeling more certain now, if the bid for stocks is any indication. The reason VIX did not crash on Thursday was the rally was just too steep. IV cannot drop when realized vol is increasing like it did on Thursday. A fair amount of FOMO has been spent, so the crash ups should happen less frequently.
I like the iron condor play now in SPX and it was terrible the last 3 months since things were too volatile. Twenty-delta options would be in-the-money in a week, but there should be less of that now. I’m looking at iron condors in big indexes and long cheaper name IV in oils, banks, semis and other ETFs.
I will hit that topic this week in OP Mentoring. Earn while you learn!
The Rundown
EZButton
I closed three trades this week after my two-week hiatus – all for wins. Ford Motor Co (Ticker: F) call calendars for a 20% gain, Taiwan Semiconductor Manufacturing Co (Ticker: TSM) strangles for a 10% gain and JP Morgan Corp (Ticker: JPM) call calendars for a 25% gain.
Easy!
OP Mentoring
My Div+ strategy is still paying, well, dividends. We locked in 25% in Ford Motor Co (Ticker: F) just before earnings.
To Your Trading Success,
