BY ANDREW GIOVINAZZI
April 9, 2024
Yo Pit Crazies,
There was a bunch of interest in the solar eclipse. My favorite was where the President and Congress people were wearing sunglasses and checking it out. The issue of course was what could they really see from Washington DC? Anyway they had a nice photo op.
For Volatility traders, the eclipse repeats, which sounds familiar. As a matter of fact it has a predictable pattern of activity. The big deal for traders is how long it takes something to repeat. Once every 20 years is not enough for a trade. Once a week or once a month would be better. The big problem with volatility in general is not that the move will repeat but when. VIX will be 12 again. That is a lock. Tesla Inc (Ticker: TSLA) might not ever see $120 again. Both are equivalent moves lower from the current price.
I added a volatility curve to the solar eclipse. Volatility does not orbit but travels in a wave. That wave crested Thursday/Friday and is starting to crash.
How far will it fall?
Almost anything works for a while trading options
Being a bull has worked well this year. Being a bear, not so much. I could be a huge call seller but unless they were covered with stock it would be a grumpy Spring. Like the solar eclipse, gravity has a big factor in trading options. The option implied volatility wants to gravitate towards the underlying stock volatility.
Once I figured that out as a floor trader it made life easier. I was fortunate enough to do that in my first few 100k contracts. Underlying SPX volatility is what draws VIX up or down. Right now that volatility for SPX is around 10%. VIX is 15%. It does not take a rocket scientist to figure out the direction of the VIX this week.
I like a 13 handle by Friday post- CPI. I am working 11 wins in a row for Weekly Profit Cycles. A 13 handle would give me 12 and 13.
It should make a great setup for UVXY as well. Stay tuned for Tuesday night!
To Your Trading Success,
-AG
Andrew Giovinazzi
30-Year Trading Pro
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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