This Is Why No Rally Will Hold

BY ANDREW GIOVINAZZI

March 20, 2025

Yo Pit Crazies, 

 

Once again, the current market is like the weather in Maine – you don’t like it. Well, don’t worry because in a few days it will all be different. But with a 20.26 VIX at midday and a 24% realized volatility over the past 10 days, the only approach that works right now is a  Two Way Trade.

 

I recently closed out some S&P 500 Trust ETF (Ticker: SPY) call spreads for a 10% gain (they were up 25%) and some Moonshot VIX puts for a 50% gain. Will the SPY puts and VIX puts play out? Only time will tell. My Two Trade Strategy thrives on 2% moves or more within a month, as it’s happened 96% of the time over the past decade, but honestly, I’ll take any move that brings in profits. 

 

What really stood out to me Thursday around midday was how little the SPY moved, staying within just a 1% range. Fed Chair Powell mentioned that things don’t look bad, but he did lower his GDP forecast, likely due to an anticipated decrease in USGov spending. Other than that, uncertainty surrounding tariffs was a key concern.

 

It’s disappointing that so few in government, regardless of party, take US government spending levels seriously. This is one of the reasons why the markets are on edge. President Trump is pushing for tariffs to lower interest rates, and in the meantime, the stock market will likely take a hit. While a VIX spike after FOMC minutes is rare, we saw one today following a solid pullback from the highs.

Now why is this jump in VIX significant?

 

Two T Words: Tariffs and Transitory

 

The fact that Fed Chair Powell singled out tariffs as an issue is significant. His mention of “transitory” inflation instantly triggered PTSD for traders, reminding them of 2022. Then, of course, President Trump tweets something along the lines of, “The tariffs are coming, lower rates now.” And just like that, the stock market rally was over.

 

Two-way trading strategies are definitely in play, but the exits will be quicker, and I’ll be taking less.

 

April 2nd, the effective date for tariffs, is just two weeks away and will likely cause havoc with SPY and VIX in the meantime. I expect the ranges to tighten as we approach the tariff date, which could surprisingly lead to a slight drop in realized volatility. However, the volatility products and VIX futures probably won’t see much movement.

 

To Your Trading Success,

 

AG

Andrew Giovinazzi

30-Year Trading Pro

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Andrew Giovinazzi

Andrew Giovinazzi

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About the Author

Andrew Giovinazzi

Andrew Giovinazzi

Former CBOE floor trader and CIO at Karman Line Capital. Author of ‘The Option Traders Hedge Fund’ with over 30 years of options trading experience.

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