VIX hit a downside plateau at 17

You Pit Crazies

We were able to close most of the S&P 500 mini index (Ticker: XSP) /VIX Trading Desk trade yesterday, even with the market going up. 

The simple answer was XSP was way up but the put butterflies moved slowly. The VIX puts moved faster and we had more of them. Now I am riding the LAST XSP put fly for a .10 entry cost and it is trading for .60 

On the  not seem like a lot, but market neutral trades can be scaled.  If the market pulls back some, this can end up being a huge win. That is something we teach in OP Mentoring and OP Pro, too.

I am not sure why the Invesco QQQ Trust (Ticker: QQQ) was up so much yesterday. Well, technically I am, since every QQQ stock from Meta Inc (Ticker: META) to Microsoft Corp (Ticker: MSFT) flew.

The QQQ was up close to 3% on what only can be described as mediocre earnings. 3% growth apparently is enough when expectations were much worse.

That also left VIX with the huge premium going into the FOMC rate news next week.

VIX curve with cash as the green line and future curve in yellow.

What does that mean?

SPX Volatilities Stopped Going Down

You can see below that after 12 p.m, VIX stopped dropping even as SPX and QQQ were ripping to daily highs.

That means implied vols in the 30-day range stopped declining and might even pick up after a drop in the morning.

That is because the SPX move was too big on the upside. Stocks crashed up and not down.

Two-Day VIX Chart

Poor GDP growth and hotter inflation numbers would seem to damp down the animal market spirits but it did not. The hope springs eternal that the Fed will stop raising rates.I do not believe they are going to do that. Even with the isolated bank issues, the Fed needs to tamp down inflation.

The trade I like is long VIX strangles in June or May. The relative prices are very low. VIX not dropping on a rally is usually a non-confirming signal, so don’t be surprised if we give up a good part of that this coming week.

The Rundown

OP Mentoring

SPDR S&P 500 Trust ETF (Ticker: SPY), iPath S&P 500 VIX Short Term Futures ETN (Ticker: VXX)  May05 414/404/394 put butterfly, 39.5/36 put spread closed for a 13% gain.

Option Shopper
CocaCola Corp (Ticker: KO) May05 64 puts closed for a 50% gain.

To Your Trading Success,

AG