Can’t Contain Contango

Yo Pit Crazies,

The beginning of the week looked kind of sad but not so going into the close Friday in the form of a 1.5% rally followed by a near .8% rally.

For those following at home, that is 100 points for the S&P 500 (SPX) and 10 points for it’s little sister the SPDR S&P 500 ETF Trust (SPY).

For now, the markets are liking the news and good earnings are fueling stock prices. We have not even gotten to tech yet for the end of the month.  

There is a tell and I will show it now.

Short-Term Volatility Is Diving

Nine-day volatility in the SPX is down to 13.39%. That is a big drop from the beginning of the week when traders were waiting for the consumer price inflation (CPI) number, which came in HEAVY. 

President Joe Biden used the bully pulpit to get the Port of LA moving. It looks like it worked.  


30 day price action for VIX nine-day vol.

Nine-day VIX is just that. SPX IV sample for nine-day rolling average options. For now, the demand is not there and VIX9D is at a 30-day low.  Friday’s note said to watch the for 16 VIX bounce, but we might not get it this coming week.

Mark bought the 16-strike puts for $.20 in the BigMoneyFlow show on Friday and VIX Nov. 17 18-strike puts are $2 in the money to VIX right now.

The Rundown

Big Money Flow

Mark Sebastian runs our marque volume flow option buying service.

      • Mark started closing OVV Nov. 19 39-strike calls at $3.50 on Friday for a 16% gain going out.

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. 

The Pro Room was taking lots of profits all over on Friday:.

      • MLV  9:45 AM  Umm AG. $VZ oct 52 calls for .07. Sold half at .30. Not a bad ROI. Mucho Gracias.  

MLV  9:57 AM  Sold a few more VZ at .60.

Mark- those are up 900%Yes that was a good trade


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 Yellow. The VIX of the VIX, VVIX, is still above 100, but the VIX curve is dropping back into contango (futures trading progressively higher than spot) and we are seeing the teens for VIX this week.

I started closing Volatility Trading Club Trade No. 265 VXX Nov. 05 puts for a 32% gain and net 5% position gain to hold SPY put butterflies.

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,


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