Something for nothing with this CPI number

BY ANDREW GIOVINAZZI

January 10, 2024

Yo Pit Crazies,

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VIX made a bottom in Dec 2023 of just under 12.00. Since then there have been two small pushes above 14 but they have gone nowhere since SPX cannot sell off past 4700. So once again we find ourselves sitting and waiting for the next USGOV number to come out.

Waiting for news usually has effects on the options market. If you want to know what those are, you might want to keep reading.

3 month VIX chart with Vol Man doodles on levels

Time and Volatility can act very similarly when we look at the Greeks Vega and Theta.

That also makes trades. It gives me something for nothing and I talked about it in the Trading Desk today.

What is something for nothing you say? No way you say?

Yes Way!

When Volatility goes up, Theta ceases to decay

That is the magic of options, as implied volatility rises, the options stop decaying today. Remember the decay will start back up and accelerate as soon as IV stops going up but in the meantime options hold their value much better than normal.

That is something for nothing when I can hold an option and it does not decay.

Vol Man marked the VIX levels for a reason. VIX likes going where it has gone before and the CPI number is holding up VIX as I mentioned above. We could move on the CPI and there is a slight chance it tips the SPX apple cart but for the most part I think it pushes us past 4800.

I expect VIX to make multi year lows on Friday and I will dump my VIX puts. If not, Weekly Profit Cycles will be dumping all their SPDR S&P 500 (Ticker: SPY) puts and put spreads.

Grab the popcorn!

To Your Trading Success,