Over the past 12 trading days, the market was betting that the stalemate in Ukraine would turn into a ceasefire and end the conflict.
Stocks rallied 10% or more from the dead bottom.
Then the reality check showed up and wants to get paid
The Russians want rubles for their gas.
The Japanese yen is tanking at zero interest rates.
President Biden promised to release oil instead of promoting domestic drilling.
Bonds kept a four-day rally going
How to trade this, you ask?
I have answers.
I Revealed the Secret in the Trading Legion
You say, Andrew, there are no secrets.
I say, ha! Look at David Blaine do a magic trick!
His magic is preparation. Knowing the lay of the land so to speak.
In the Trading Legion this week we covered Vega versus Gamma.
The rally in S&P 500 was intense but ultimately it killed the realized vol because it was so measured. Low realized vol can be sneaky when the move is so large … like a dam waiting to burst.
Sometimes stocks like to go back to where they came from.
Note VolMan riding the SPX up with the lower 14.33 10-day realized vol. Volatility in the SPX got into the 17s for some out-of-the-money puts. That bone crushing rally produced a 14.33 realized vol and liquidity providers were only too happy to tank the IV with the rally …
Options got cheap and I opted for the long vega position.
Did I think this was all over and stocks were returning to business as usual? I could not see that happening.
I added some put flies in several products at Option Pit over the last two days – in Trading Legion, Volatility Trading Club, and Power Gains with Bill Griffo. They paid decently Thursday, but I will see if they score big over the coming days.
Right now they are running up 10% to 40%, depending on the fly. And each fly does have a cheap hedge.
The Lesson: Know the conditions before placing a trade and you could look like a magician.
(Also … look for a new and improved Trading Legion coming soon!)
The Rundown
Capitol Gains w/ Frank Gregory
My short put spreads in Petrobras SA (Ticker: PBR) are holding up my Intel Corp (Ticker: INTC) call spreads. Frank and I have put on 11 trades in 2002 and have eight wins closed, just on loss and two open.
Option Shopper
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.
My students are getting better fills than me!
Trading Legion
I bought some SPDR S&P 500 Trust ETF (Ticker:SPY) Apr20 455/445/435 put flies with just one upside SPY call Wednesday. The put flies were running up 50% by the close Thursday. I should have the call for a credit and potential ceasefire on the upside.
Volatility Edge & Volatility Trading Club:
The Option Pit VIX Light Is Red. Even with the selloff on Thursday, VIX closed well in contango, which is still bearish VIX.
In Volatility Trading Club trades No. 286 and 287, I own upside Proshares Ultra Short QQQ (Ticker: SQQQ) call flies and downside SPY put flies against VIX puts. Both trades are running green and good closes on the SQQQ/SPY will generate VIX puts for credits.
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,
AG