Yo Pit Crazies,
What a crazy week!
We had a tick range for the S&P 500 Index (SPX) as low as 4,305 and as high as 4,464.
Just 160 points or 3.5% in 4 days. That is a range and volatility can price ranges.
Range is one thing, but flow is another! Lots of ways to win out there.
Also note that VIX Friday got a very slight move on a flat day. That is part of the mix.
I will mix it all below
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VIX Prices 30-day Volatility and Daily Expected Moves
Thirty-day volatility is just that: what the market thinks the daily volatility will be on average for the next 30 days.
Remember, as I have written here before, a 1% daily move is a 16 volatility, 2% daily move is a 32 volatility, etc.
VIX 10-days with 1-minute candles.
VIX closed last Friday at about 20, so the market was expecting 1.25% per day for 30 days.
The Evergrande scare changed that perception quickly on Monday when VIX shot to 28 or closer to 1.75% per day. That is about 75 SPX points per day.
Traders were expecting the big move by Monday evening and even the possibility of a 150 point snapback. They got what they thought would happen.
With the Fed calling the ball and the China issue easing, expect lower volatility this week.
The Lesson: VIX changes when SPX movement expectations change. That can be up or down.
Capitol Gains 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.
- Our Exxon Mobil (Ticker: XOM) trade is back up 25% and I am letting it run here. Looking for XOM to break out to $60. Goal is another 50%, if I can get it.
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 sentiment is still bearish VIX/VXX/UVXY 4 days in
Cat grabbed a Bill Griffo trade:
(Of course I got stopped out on these …)
Each week, Option Pit CEO Mark Sebastian looks for low-volatility, mid-term duration call buying and put buying opportunities.
- Mark rang up an MGM Inc. (Ticker: MGM) calls for 75% gains as he milks this profit cow.
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.
- I added some retail in Dollar Tree Inc. (Ticker: DLTR), which is just holding now.
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 will most likely turn red with a VIX run back to 16.
- VTC Trade No. 263 is up 10% as of now, with both sides still open.
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,