Stocks rip to all time highs as NVDA takes over Canada

BY ANDREW GIOVINAZZI

February 23, 2024

Yo Pit Crazies,

There is still room for the Trade Zone and Mark put out his first trade today. Hint: it is a fruit company. Trade with confidence at the top.

I spent all morning closing trades in Pit Report, Trading Desk, OP Mentoring and Weekly Profit Cycles. The OP Mentoring trade was the exactly the wrong trade for the environment this week but I managed it to a small gain. That will be a subject for this week since it is not what you trade, but how you manage it.

The environment right now is all AI. Nvidia’s (Ticker: NVDA) market cap is bigger than Canada! What the market has a hard time pricing is one way freight trains. Generally traders price puts more expensively because stocks go down faster than they go up. Unless you have AI in your ticker.

This strange looking graph below is the Cboe Volatility Index (Ticker VIX).

6 month VIX chart with 1 day candles

It is on the cusp on an historic run.

Let’s see what it is and what it the reason.

VIX is programmed to go down when SPX goes up

The reason for this is option volatility skews low as SPX goes up in strike. It is calculated to go lower with a rise in SPX. When it does not, that means SPX options per strike are increasing. Right now the reason they are increasing is for “right side” moves or SPX moving straight up above the money.

Right now the 30 day straddle, call and the put at the money, in SPX is 137. SPX moved100 just Thursday. If SPX moves $10 up everyday for 3 weeks that is $150. The volatility of SPX decreases even as the value of the straddle increases. Funny that. That is where we find ourselves. The right side or upside option vol is increasing as SPX rises.