Yo Pit Crazies,
I hope everyone had a great weekend. Now we get to watch volatility spring back to life as the VIX no doubt will print higher after the “weekend effect.”
Will realized volatility start to shake the SPX out of its sleep?
Unemployment benefits have expired for 7.5 million Americans, so I assume next month’s non-farm payroll number might look different.
But that’s a whole month from now.
Will the market move this week? Let’s take stock!
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But first, since we just wrapped up Labor Day, now is a good reminder to get back to work on your trading.
And I have an idea.
Mark Sebastian will show you what you’re missing during a free live event this Thursday, Sept. 9 at 7 p.m.
I’ll be there, too, as will the rest of the Option Pit Team …
And we’ll be giving you some of our top plays for the rest of 2021 just for showing up to this no cost event!
Secure your spot now! (Seating is limited.)
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Market on the Move?
The strip of SPY volatilities below should look familiar …
Note that if you look from left to right, the trend of the volatility — sigmas in this case, which are average volatilities for the cycle — are mostly increasing. These are collectively known as term structure.
This means the liquidity provider does not think much will happen in the short term because volatilities are so low. It is expected that volatility will be worth more in the future because of time.
Why?
Because time = the potential for more volatility.
What we see right now is normal and known as contango. That is upward sloping volatility in time. I don’t expect zip for activity this week and we might even drift lower to 4500. Drift is the key as the market is signalling very little movement.
I will price out the 4500/450 calendars in SPX/SPY during today’s OP Market . Let’s see if there is a cheap shot at a big strike touch.
The Lesson: The liquidity provider shows the way with term structure. Just learn how to read it. We can help.
To Your Trading Success,
AG