Yo Pit Crazies,
Memorial Day is a good day to be thankful to all who have gone before us. Much appreciation to those who gave their all.
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I am surprised the market is up so much – 8% in a week.
Once again, investors piled into stocks because:
The economy might be so weak the Fed won’t have to raise rates more than expected.
Bear Market Rallies are vicious.
Is the volatility ready to end?
Let’s look.
30 Day Average Realized Vol for SPX is still increasing
Yes, I said that mouthful.
The S&P 500 is up a jaw-dropping 8% in the last week. Remember, realized volatility cuts up and down market.
The fact we continue to average up in realized volatility means the most recent days are moving more than the previous weeks in the 30-day sample. That is saying something.
Meanwhile, implied volatility is heading lower but still in Zone 4 (24 VIX or higher is The Danger Zone). That means we should expect extreme moves.
SPX one-day candles on top with 30-day implied vol in red and 30-day realized vol in blue on the bottom chart
The short answer here is I want to own strangles (long calls and puts) in SPX or the little cousin SPDR S&P 500 trust (Ticker: SPY).
In OP Mentoring I bought a gold strangle thinking gold would move post-FOMC but it did not move near the recent levels, so I closed my strangle for a small loss. (It happens!)
If I don’t get the action on a stangle I close for a small loss to control my risk dollars. It will not surprise me to see SPX up or down 100 points next week even on the shortened 4 day calendar.
The Rundown
Capital Gains
I closed a VALE SA (Ticker: VALE) diagonal call spread for a 48% gain this week.
Big Money Flow
Mark hit a gusher with Schlumberger NV (Ticker: SLB) calls for an 88% gain.
Power Income Trader:
Bill is back at it with his incredible track record of wins in the Macro Trades. He closed a MSCI Brazil Index ETF (Ticker: EWZ) for a 28% gain. That’s 10 wins now in his last 13 closes.
Pro Trade Room:
LRD making a more bucks winning the #FridayAlgoTrade:
Nitro Trader:
Mark closed out his Exxon Mobil Corp (Ticker: XOM) call flies for an 88% gain.
To Your Trading Success,
AG