Earnings, Earnings, Earnings!!

Heading into Thursday, we have a huge day of earnings.

On Thursday afternoon 4 of the ‘Big 5’ report their earnings…

AAPL, AMZN, FB, GOOG/GOOGL  all report on Thursday night.

This represents about 35% of the NASDAQ 100 reporting in one afternoon.

One would think that this would cause the IV of the QQQ to be OFF THE CHARTS

Given how much those names have rallied…

And how much the market has been moving over the last 6 months can only help.

So why is the QQQ 30 Day IV so low:

QQQ premiums were lower TWO WEEKS AGO!!!

The straddle that expires on Friday to me…

SEEMS DIRT CHEAP.

I can buy the July31 QQQ 257 straddle for about 7 bucks…

The ETF moved more than 3 bucks TODAY…

The VIX Light is Red.

Your Only Option,

Mark Sebastian

Well This is WEIRD (Trade Inside)…

Something has to give!

Either the VIX is too cheap…

Or the August VIX future is  too expensive….

With a month to go, a 3 point spread between the future and the cash is incredibly wide.

At this point, the spread should be below 2, especially with the VIX around 25 and realized volatility closer to 12.

The  question is…

which is right?

Typically it’s been the futures.

Which would not be bad for markets.

So for now, I like long SPY put and long VXX put as a pair.

The VIX Light is Red.

Your Only Option,

Mark Sebastian

A Spread No One Is Watching (Hint: You NEED To)

If you are wondering if the VIX at 24 means there is no more risk in the market you are wrong…

There is HUGE risk in the market, you just need to look somewhere else to see it.

The VXN, the VIX of the NASDAQ 100 (the QQQ) is still way above 30.

Interestingly, the spread between the VXN and the VIX is astronomically high.

While off the year high from a few days ago, there is still a GIANT spread between the cost of insurance on the SPX and the cost of insurance on the NDX.

The chart below tracks the VXN less the VIX, I think you can clearly see what is happening:

VXN, 8 points over VIX, is at a level we RARELY see.  You have to go back to 2006 to see the spread this wide.

So what does this mean?  

If one wants to be long the market, it might make sense to do so being long the SPX or the DJX and then using puts on QQQ to hedge it.

This is called a dispersion trade, and professionals love it.

The market seems to be worried about the QQQ’s prospects…

This is something to watch.

Your Only Option,

Mark Sebastian

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.

Traffic Light Change…Here’s Why

The VIX ended the day flat…

The VIX futures were down…

VXX was down….

All of the major indexes were down…

What does this mean?

It means that we are starting to see a change in money flow.

We have seen VIX lows happen NOT when AAPL is off to the races (or the other big 5 names)…

⇒ VIX lows happen when XLI,  XLE, and XLF are rallying. <==  

This is because the OLD economy has been where ALL of the perceived risk is living.

Now that the end might be near and a Vacine MIGHT happen,

we see a rallyin the transpo’s, the industrials, and the banks.

Meanwhile money comes out of the QQQ.

BUT with money leaving 23% of the S&P 500 and into a chunk of the other 77%  what is going to happen to the market?

Nothing if the dollars moving are somewhat dollar neutral within the stock market.

Thus, VIX falls.

I am switching the traffic light to RED.  

I think volatility is going to be moving to a new level revolving around 25 or maybe even lower…

It was hovering around 30.

The VIX Traffic Light is Red.

Your Only Option,

Mark Sebastian

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.

The Questions That Matter Inside.

Can volatility die if Apple falls off a cliff?

What about if Amazon falls off a cliff?

The answer might be yes…

What if the money in the market doesn’t want to go to cash?

What if the Algo’s sell momentum stocks and instead of sitting on cash…

Buy something else?

But what?

What about the REST of the S&P 500?

Yes,  the S&P 500 is now 23% in 5 stocks.

But that means 77% is split up between the other 500…

…most of it falling in the top 50

Names that used to be massive…

…or still are when we think about it.

Names like XOM,  CVX,  JPM, KO, or C

In that case we could see the top 5 take a dive,  and the VIX…

Go DOWN.

The last time that happened the VIX was lower than it is now.

It was the low from early June.

Could the Covid is gonna end trade be put back on?

We would see the VIX go to 25?  Maybe lower.

I would be buying DJX selling SPX…

…If I thought that was going to happen.

The VIX Traffic Light is Yellow

Your Only Option,

Mark Sebastian

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.

The KEY Today Was In VVIX. Find Out Inside.

Well that did not take long.

After what seemed like a move STRAIGHT UP in the SPX…

…The VIX took its turn.

All day the VIX was correlating with the S&P 500 – Which is usually never a good thing.

Then…the VVIX began to pop.

The next thing you know, the SPX was tanking.

TSLA went from up 200 to down 100.

Now the VIX cash is over the futures.

The Traffic light in 2 days has gone from Red to almost Green in about a day.

Needless to say, there is a lot of real demand for insurance products starting to flood the market.

The VIX Traffic Light is Yellow.

Your Only Option,

Mark Sebastian

P.S. – This is exactly what I have been talking about is going to happen.  And it doesn’t just start with a blip.  The volatility will only get worse.  I spoke about this on a recent webinar last week where my trading pick I made live has already DOUBLED.  Seriously…check out the replay here.

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.

What is Driving AAPL?

Is AAPL Bullet Proof?

So far the answer has been yes.

Despite declining earnings the stock has gone up and up and up.

Many are citing ‘Robinhood’  traders.

I think that is a false flag.

I think the more likely scenario is that there is a bit of the ‘algo momo’ trade riding AAPL.

In addition, it may be a bit of a ‘TINA’ Trade (there is no alternative).

Either way, earnings are coming up which would raise IV.

However, we are 3 weeks away and the 30 DAY IV for AAPL options is SCREAMING higher.

When a stock rallies this hard and the IV screams this much, it scares me.

This is important to VIX because AAPL is now the most valuable company in the world.

It’s the number 1 stock in the NDX, SPX, and the DJX.

If it takes a dive, and its options are pricing like it will, we could have an ugly day or two fast.

The VIX Traffic Light is Yellow

Your Only Option,

Mark Sebastian

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.

This Just Hit My Radar…

One thing that just hit my radar is the VVIX

The VIX of VIX is now at the lowest level since early June.

It got near 100 in early June,  but has not really been much lower since the pandemic began.

At the same time we are seeing the market start to slow down…if only a touch. 

SPX HV has fallen to sub 25 in the last week.

A falling VIX,  falling realized volatility,  and the falling VVIX is usually a sign of a market that is become more boring

Thus despite the covid bomb,  maybe the market is not going to dive.

In that scenario,  we could see XLI, XLF, and XLE rally while the ‘big 5 (aapl msft googl, amzn, fb)’  sell off.

We shall see.

The VIX Traffic Light is Red (orange).

Your Only Option,

Mark Sebastian

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.

The VIX Is Not Worried

Despite the big sell off today the VIX is still not worried.

Yes, the VIX went up today.

But, it did not break 30.

The VIX did not make a crazy move higher.

Most importantly, the VIX did not go into any kind of backwardation.

The curve got a whole late flatter

But as a whole, the VIX is still the same.

I would note that August and September are now about the same, that is important.

But July continues to price the market going higher.

This lends to my thoughts that we could see the market rally higher.

The market has a day of reckoning coming, but VIX is not there yet.

If we get a follow up sell off, it probably gets bought.

At some point soon… 

That will not happen.

The VIX Traffic Light is Red (orange).

Your Only Option,

Mark Sebastian

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.

I Have Bad News Inside

Mark your calendars for Wednesday night at 8pm EST. My buddy Jeff is revealing his secret on how to predict the market direction 5 days in advance! The chief investment strategist of Altos Trading is hosting a special event just for my members. I’m gonna be there and so should you. Click here to sign up.


The S&P 500 is nearing 3180.

It might make a run at 3200 or even higher pretty soon here.

However, I continue to think the market is going higher, but I’m holding my nose.

Why?

Because we are going to touch a new recent high at this rate.

And the VIX is NOT going to be at a new low.

It is going to take an all out vol bloodbath for the VIX to get as low as it got in early June.

I simply do not see that happening.

Thus, the market is probably going to remain violent…

Which means we are heading for another one of those fun 140 point down days.  Yes, you read that right.

When will that happen???

I do not know…could be in just a few days.

Could be right into earnings season.

The VIX Traffic Light is Red (orange).

Your Only Option,

Mark Sebastian

P.S. – This is why I’m excited about the event on Wednesday, with Jeff, where he uses his one indicator that has picked with 100% accuracy every major crash.  I’m excited to speak and hear him explain his awesome tool.

Check it out here.

  • DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees do not offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
  • Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Option Pit LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute a solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
  • To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Use caution when entering any option transaction and it is recommended you consult with your financial advisor for investment, legal or tax advice relating to options transactions.