Yo Pit Crazies,
Check out Mark’s Nitro Trader extravaganza in a market that has had 40 2%+ daily moves in 2022.
Yes, you read that right.
The Standard & Poor's 500 stock index (Ticker: SPX) has had so many 2% daily moves this year that you need eight hands to count them!
There is an easy way to trade this kind of volatility in the markets – and you only need two hands.
But first traders need to identify what is going on.
The Federal Reserve Is Turning Every Day Into An Earnings Cycle
Ever since Ben Bernanke got hyperactive in micromanaging economic activity by increasing the Fed’s balance sheet, the stock market has gotten used to a steady stream of dope.
Now the dope supply is at an end and traders cannot figure out what to do next.
My first 20 years as an option trader had only a few big upside days. The last 10 years of the overactive Fed have been nuts for upside moves.
But 2022 might be the last time we see this kind of upside action for a while. The fact that Fed pronouncements can have such an impact is turning every week into an “earnings week” for the broader market.
The problem with earnings cycles is that the option model has a hard time pricing one day events, so traders jack up the volatility to compensate for the uncertainty. That is why Friday’s move straight up did not produce a real volatility crush.
It’s a never-ending earnings cycle around what the Fed might say. Good times!
Monday could be just like Friday now that the Fed leaked through the Wall Street Journal that the .75 bps hike next week might be the last big one for a while.
Option Pit products do well generally in volatile markets because we aim to ride cresting waves of volatility.
In Nitro Trader, we had on a long SPDR S&P 500 Trust ETF (Ticker: SPY) call calendar spread and a put butterfly Tesla Inc. (Ticker: TSLA) position that did very well on Friday, but I opted to keep them open.
I kept two wins open as well in OP Mentoring and SPY Master since SPY went straight up and my long vol positions were close to unchanged. We shall see how it goes Monday.
The trick is to know how to size the position correctly – it’s something Mark and I teach regularly.
Exciting times!
The Rundown
Power Income Trader
Bill is keeping the wins coming in SPDR S&P Regional Banking ETF (Ticker: KRE) put spread with a 38% gain.
To Your Trading Success,
AG