BY ANDREW GIOVINAZZI
August 4, 2023
Yo Pit Crazies,
I will unpack my Easy Trade Button next week for you guys.
Day 6 of VIX not making lower lows than the day before. Now I kind of expected this because the market was waiting for Apple Inc (Ticker: AAPL) and Amazon.com Inc (TIcker: AMZN) earnings. AMZN was good and AAPL was not. There is more economic data but factually the underlying economy is still in a growth spurt after the end of the COVID crisis. The government put people out of work, then back into work.
The crisis was over realistically midway through 2020 but by then it had taken on a life of its own. The stock market figured out the crisis was thankfully manageable by May of 2020 when traders started buying stocks again in bulk. Government spending could easily have frozen by 2021 and we would be in better shape with less inflation right now. But that did not happen. That is a big part of the unease in the current market rally.
10-day VIX chart
Both stock and VIX are forward price mechanisms. The price you see today reflects future expectations. I added put butterflies with some calls in the SPDR S&P 500 Trust (Ticker: SPY) on Thursday in OP Mentoring because of that.
What does VIX expect next week?
As of the close Thursday, VIX was expecting quite a bit of action
VIX is looking forward to 30 day average volatility. I saw us close right around 16%. The last 30 days SPY has only turned in 9.65% realized volatility. Basically option implied vol is running almost double realized vol.
That is the market looking for a lot more movement than what we have. To be fair, VIX will run 2-3% hotter since it samples all options with a bid and downside IV is more expensive so it gets a greater weighting. VIX should be around 12% and more this weekend. I expect VIX to drop after the number today, if it doesn’t the credit downgrade could have some legs and 450 SPY becomes a resistance instead of support.
The Rundown
OP Mentoring(DIV+)
International Business Machines (Ticker: IBM) Aug18 135/145 call spread, 120 puts, 100 shares closed for a 5% gain
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
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PFE May17 26 calls closed for a 66% win
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