Stocks and Volatility are back to the dangerous dance

BY ANDREW GIOVINAZZI

November 22, 2024

Yo Pit Crazies,

So you remember Dirty Dancing? Way back when movies were fun and long before Twerking was invented. Well the folks that worked at the summer camp in the movie like to have a couple of pops and get loose. They sure could dance and It was all just so forbidden.

I find myself doing the forbidden volatility dance again. Where relationships are not what they are supposed to be. That is usually a big danger sign. Yes today I finally beat the great Licia Leslie in the crazy % win game with a 5000% er but that does not mean I can rest on my laurels.

Patrick Swayze, God rest his soul, must dance and I must trade. For this I will explain the strange looking graph below. It is brash and it is new.

It is the Skew-o-later.

And it is coming to a trade near you!

On a green SPX day, VIX and volatility did not want to go down

The graph below shows the SPX IV ATM, in the middle, with upside call volatility to the right and downside put volatility to the left. This is SPX Skew that many of you have heard so much about. The Skew-o-later records volatility over the passage of time. I could not resist. The blue line is the morning sample and the orange line is the most recent sample. The black line was closed yesterday’s close.

Even though VIX was down on the day, clearly IV per strike was not. The orange line closed on the black line.

Traders were freaked out that Putin lobbed an empty missile at Ukraine. The escalation that has Frank so unhappy is still with us. That means I want to stay bullish Nat Gas and oil.

IV relaxed from the morning peak but finished unchanged. Traders are not ready to forget Ukraine and the Dirty Vol Dance is back for another day. We have the 0 Theta play on and I expect good results, even if this peak vol.

I am ready for the dance to be over.

To Your Trading Success,