BY ANDREW GIOVINAZZI
March 25, 2025
Yo Pit Crazies,
This topic came up in Capital Gains today—what makes a successful Wheel Trade? Before I dive into the trade I prefer, I want to mention that Hans Albrect will be going live on Thursday to help close the deal on Income Trading – don’t miss it.
For the first time in a while, the S&P 500 trust ETF (Ticker: SPY) managed to go nowhere. While one day doesn’t define a market, this was eerily similar to Friday. And as we saw, Friday’s movement led to a significant rally on Monday after the news broke that President Trump might ease up on tariffs.
Stocks have been drifting higher ever since. However, what catches my attention is the direction of the Mag 7. Will Apple Inc (Ticker: AAPL) rally back to $260? For the SPY to rally, a bunch of those stocks need to start picking up steam.
SPY 5 Day chart with sigma vols
At the moment, I believe that’s challenging. Yes, the stocks could rally, but will they reach new highs with the current negative sentiment surrounding earnings and future projections? I think the overall tone of the rally is likely to shift somewhat.
This is the year for income plays until we get more clarity from the White House on spending and policies they plan to maintain. Right now, the tariffs are more of a distraction from the bigger issue of a $1 trillion spending cut. It needs to happen, but the question is: will it?
That is why a VIX at a 17 is an interesting number for income traders.
VIX at a 17 is close to the middle for VIX
18 VIX is the spot where VIX spends half of its time above and half below. What makes this ideal is that option premiums are a little higher and traders can get better prices selling options.
As shown below, the 18 line is a pretty good place to get some better option premiums. With a market that cannot really make up its mind, income strategies that trade options away from the market are better suited to the current situation.
VIX 2 year chart
If we do get some more White House surprises, expect the VIX to relax and go lower. While I don’t anticipate a move to all-time highs, a 580 SPY is possible this week. Income strategies based around that should perform well.
Will Trump reveal the details early, or wait until April 2nd? Either way, that could create even more opportunities next week.
To Your Trading Success,
AG
Andrew Giovinazzi
30-Year Trading Pro
See what's hot at option pit
CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain