Did the Fed Save Stocks Again?

Andrew Giovinazzi

Yo Pit Crazies,

For a while this week it looked like the Fed put – that’s the Federal Reserve stepping in to support stock prices with policies such as lower rates and additional liquidity – was done.

Kaput! Finished! No Mas!

Yet folks climbed all over each other to buy stocks on Friday.

Ahead of a weekend full of Tolstoy-level Russian suspense, VIX closed at a one-month low.

And that always means something

Changing VIX Zones Is Always A Big Deal

Coming out of Zone 4 (VIX > 24) to Zone 3 (VIX 18-23) is usually the most ripe time to short VIX.

The reason being that the vol of VIX (VVIX) is much lower than when things are at a nosebleed fever pitch.

VIX daily chart for the last month.

With the momentum down in VIX, it is clear the Fed did what the market wanted.

It wanted higher rates – but not too high.

That is what traders got. I expect a 20 VIX this week, as long as the Ukraine situation does not get worse.

Power Income Trader:

Power Income Trader is a systematic approach to trading inflation. By pulling real-time data from the Fed, US Treasury and Gov’t, Power Income Trader alerts users on changes in money flow driven by Fed policy. Bill’s system puts you out in front of the most powerful money flow in the world.

Bill and I added a long iShares Silver Trust (Ticker: SLV) call spread and a long SPDR Select Financials ETF (Ticker: XLF) put spread that is running even so far.

Big Money Flow

Mark flew into some American Airlines Inc (Ticker: AAL) calls.

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 #AlgoTradeFriday racked up some nice gains. For instance, my 50% in ProShares Ultra S&P Short Term VIX Futures ETN (Ticker: UVXY) puts was mere chicken feed.

Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle/calendar trading vehicle. The goal is to teach students the best times to buy options.

I closed 2 Apple Inc (Ticker: AAPL) strangles this week for 7% and 15% gains. That is 15 wins in the last 18 trades.

Volatility Edge & Volatility Trading Club:
The Option Pit VIX Light Is Yellow. VVIX is still above 100 but VIX did trade below 24 so for the first time in 1 month VIX saw Zone 3.

For the Vol Trade Club I closed some put in Trade 284 for a 50% gain.

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,