BY ANDREW GIOVINAZZI
February 21, 2024
Yo Pit Crazies,
There is still some space in the Trade Zone. I will even do a preso on strangles and straddles as part of the Option Pit Spreaducation series. Knowing how things work helps. It is hard to drive a car if you do not know what the gas pedal does.
Not long ago, traders priced in 6 rate cuts in 2024. We will be lucky to get 1 and I am not sure I want it. In the 1990’s, which feels like peak American Civilization, interest rates went up and there was a booming stock market. Bill Clinton, Robert Ruben and Newt Gingrich balanced the budget and even stopped issuing US Government bonds for a while.
We do not have that kind of leadership now. We have economic growth on a 2 Trillion $ a year deficit. In the past only WW2, COVID or the GFC generated a deficit like that. None of those things are happening so where is the money going? Not to me that is for sure. That kind of spending has been inflationary. It has been going on for a while now.
That brings me to gold or the SPDR Gold Trust (Ticker: GLD). GLD stopped right at its 50 day moving average.
1 year GLD chart with 1 day candles
What’s up with that?
GLD Implied volatility is at 1 year lows
Note below that GLD has been running some larger, volatile trends. The uptrends tend to coincide with the dovish comments by Fed Chair JPowell and his band of front-running governors at the Federal Reserve.
What I find interesting is that implied volatility is at a dirt low level. If the Fed is going to change course and raise rates that would tank GLD. If the Fed talks dovish that would send GLD flying. Thus the more volatile trends at the end of 2023.
90 day realized volatility in blue, 60 day implied volatility in yellow
I cued this up for Easy Trade Button and might add it today. I added my Robinhood Markets Inc (Ticker: HOOD) strangles Tuesday afternoon. The FOMC and Nvidia Inc (Ticker: NVDA) will see if the race to 5000 has a happy ending or not. Either way, GLD should move a few bucks this week.
Mark Sebastian talks about buying options here in our YouTube Channel. Check it out.
To Your Trading Success,
-AG
Andrew Giovinazzi
30-Year Trading Pro
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