Anatomy of a Profit Run

Yo Pit Crazies,

 

We saw some interesting changes last week …

 

      • The S&P 500 (Ticker: SPX) and Powershares Invesco QQQ Trust Series 1 (QQQ) hit all-time highs.
      • Congress made nice on infrastructure.
      • The Fed walked back nearly all of the hawkish comments from the week before.

 

One thing that remained constant?

 

The inexorable and steady decline of the terrible vol product ProShares Ultra VIX Short term futures (Ticker: UVXY).

 

But Mark Sebastian profited nicely, including UVXY closes for gains of 74% and 62%

 

Just like he said he would.

 

How’d He Do That?

 

UVXY usually reverse splits every couple of years, transforming from a single-digit dwarf to a double-digit decay behemoth. (A reverse split produces fewer shares at higher prices.)

 

Mark predicted profits in Volatility Edge at the end of May when UVXY reverse split. Take a look at what happened to the ETF since:

 

UVXY Chart from the reverse split May 24, 2021

 

Mark sussed out that, even though UVXY was at a COVID-era low, the relative dollar moves would get bigger in UVXY even as the percentage moves in VIX futures stayed the same.

 

VIX dropped a bit over $4 from May 24 to last Friday, while UVXY dropped $13!

 

That was THE opportunity Mark laid out in his webinar.

 

Over the past month, it’s led to closes of:

 

      • 74%
      • 63%,
      • 62%,
      • 20%
      • 13%

 

Not too shabby!

 

At this point in Vol Edge, Mark only has small-dollar, short- term UVXY puts on since he got the big chunk of the future decay booked already.

 

There is still a decay of $.26 per day, so UVXY can be south of $26. The big dough was made right after the webinar as that was *the* volatility opportunity of 2021 so far.  

 

Mark is already working on the next one — and has paired the quarterly version of Volatility Edge with a 5-pack of picks from Head Income Hunter Bill Griffo just ahead of new European gold regulations that go into effect tomorrow.

 

Click here to see that dynamite package.

 

The Rundown

 

Power Moves Portfolio w/ Frank Gregory
Option Pit DC and Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.

The live trade log is here, and I’ll have a full recap for you every Wednesday.

Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session. 

 

      • Lots of Alibaba Group (Ticker: BABA) call buying in the room.
      • I bought and closed the BABA July 02/July 16 230-strike calendar for a 60% gain in a day and rolled to some long-term calls, as did a few of the Roomies.
      • QuantumScape Corp. (Ticker: QS) is on deck for a breakout, per Roomie Tech Master Mike. This name is also in the Power Moves Portfolio.

 

Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Gamma Radar to find order flow in active names.

      • Mark is riding a ProShares Trust Ultra VIX Short Term Futures (Ticker: UVXY) July 02 27-strike put.
      • He has nice looking long call trades in Palantir (Ticker: PLTR), Ford (Ticker: F), ExxonMobil (Ticker: XOM) and Walt Disney Corp (Ticker: DIS).
      • The last ContextLogic (Ticker: WISH) calls expired, but he still ended up with a 25% win on WISH trading for the week.

 

Sharp Bets:

Each week, Option Pit CEO Mark Sebastian looks for low-volatility, mid-term duration call buying and put buying opportunities.

 

      • I subbed in for Mark this week and bought some Walmart (Ticker: WMT) July 23 139-strike calls for $1.55. They went up around 20%. I like WMT to $140 at least.  
      • Mark is riding Energy Transfer LP (Ticker: ET) freebie calls, sold half and owns the rest for credit a la Vol Trade Club/Trading Legion strategy
      • Oil looks solid and we have an outside shot at the CSX Corp (Ticker: CSX) July 02 100-strike coming in.

 

Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.

 

      • Fastly Inc. (Ticker: FSLY) made a power move again, closing at a short-term high as I rode my remaining calls higher.

 

Volatility Edge/Volatility Trading Club:

Volatility Edge is run by Mark and uses the proprietary Option Pit VIX Light indicator to guide volatility trading. The Vol Trade Club is run by me (AG), and employs a  long strangle strategy that seeks to use VIX future decay to pay for upside VIX, VXX and UVXY options.

The Option Pit VIX Light is still red, and the VIX broke 16 for the first post-COVID 15 close.

 

At this point, drops in VIX will likely come slower as it gets to the bottom of Zone 2 (13-18).  I think the Aug. 

 

VIX cycle is very enticing with VIX Aug. 18 17-strike puts only $1.15  That stangle could go into the VTC Monday.

 

For Volatility Edge

 

Mark is lighter short UVXY now and rolled into trade No. 100 UVXY July 02 27-strike puts for $.95.

For Volatility Trading Club:

 

      • I have sold about 70% of my VIX and VXX puts out down here.  The strategy owns calls and  puts  so I have lot off potential upside should VIX change direction over the coming weeks.
      • I added Trade No. 251 — long SPY July 09 420/412/404 put butterflies and VXX July 09 29.5-strike puts. The trade is running even and if I can get $1.95 for the VXX, I will have the SPY put flies for a credit. Those might come in handy in the coming weeks.
      • Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!

To Your Trading Success,

AG

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