SPX to trade 2900 is recurring theme over the last year and really is a big theme again just recently. We have several convergences happening so I am going to thrill you with my Ouija Board analysis skills. There is no doubt in my mind we trade 2900 again. Of course it is a matter of when but Good Friday is looming in the future and market has a day off there. With more Chinese News Bites coming fast and furious some kind of trade deal will materialize. VIX expiration is Holy Week too. That is a symbol for Christians and a new beginning so maybe this starts the next leg of the bull market. It is a stretch I admit it…
Inflection around 2900
Beside all of the Christian Mysticism I have going what I am really saying is 2900 is a make or break inflection point so the simple idea is construct a trade around that level. VIX cash has been holding around 14 this week for no apparent reason except the post Trade War Deal move. Once that happens the market is looking for a bit of a move one way or the other. Is 2900 priced in an interesting way?
Do we move to 2900 and stop or break through
SPX Apr22 2920 strike is priced at 8.87% volatility discounted for the 3 day weekend. Add the weekend back and the trade bumps up but it is still pretty low volatility-wise. Even a breath of good news is pushing SPX up 20 points or so and the intervening time should give us another headline or two. Apr VIX futures is not letting go of 15 either which suggests to me that some substantial news should happen in the cycle. Let’s call it the Long Good Friday.
Time spreads at 2900
The SPX Apr22 2900 is cheap enough it makes a good long leg for a calendar. Sell a contract in front of the strike for a really cheap spread. It is possible to hedge multiple time spreads with junk puts.
Disclosure: SPX and VIX positions