Buy AAPL! I can hear the CNBC pundits now for those that loved it at $213, $188 would be an even better deal 10% lower. I don’t know what is worse, the Trade War where AAPL cannot sell phones or the App Story Monopoly shakedown out of the Supreme Court. Everyone gets $4 and one lucky law firm will get $5 billion. Both of those things added up to a bad day for AAPL. It is a bad day for stocks and the QQQ too. I don’t get why VIX did not act more forcefully given the selloff on Friday in volatility and bounce today. Lets’ examine these goodies.
VIX is underperforming the big SPX move
I am sure readers will hear of the big move in SPX and the underwhelming move in VIX. Don’t get me wrong the VIX move is big today but SPX down 2.5% feels worse. With all the negative sentiment VIX has yet to go in Zone 4 or the upper quartile of volatility for the SPX. I will believe this is for real when I see that but as yet it has not. This is one of the rare times when VIX futures really lag behind the bigger moves in SPX. Setting up a VIX and SPX trade looks intriguing. Even an AAPL, VIX pair looks pretty good. That way if the Trade War gets really hot, one is ready.
China learned to Tweet
Doing the Options Insider Radio Show I mentioned that China is learning to tweet. Cancelling BA purchases, banning IPhones and dumping US Gov Treasuries were all part of the tweet plan. Those would all be an act of self-flagellation since the Chinese need planes, like phones and hold lots of Treasury debt that they collect by running a massive trade imbalance. Those balloons where enough to send everyone in a freak out after the happy Friday close. That is probably where the opportunity is.
VIX call spreads are cheap and so is AAPL
Selling out of the money put spreads in AAPL or BA might work well since some much lower priced puts have a bid. Long short term VIX call spreads can work as a cheap hedge too. Since China can tweet now, anything can happen.
Disclosure AAPL, SPY and VIX positions
Follow Andrew@optionvol You can hear Andrew on Option Block every week.
Follow Mark@optionpit You can hear Mark on Volatility Views every week. Volatility View Crystal Ball is on Friday’s.