Yo Pit Crazies,
This trade-the-Fed thing is going to be with us forever, it seems. This week is just a sign of things to come.
I strongly recommend you get Macro Griff on your side.
Now, up for a game of Guess the Chart?
Vol Man sees something weird, and he tried to trade it yesterday.
Let’s check it out.
The Answer Is …
That is a chart of ProShares Ultra S&P Short Term VIX Futures ETN (Ticker: UVXY) options of the last two weeks.
UVXY has had a range of 12 to 23 on the recent bout of doubt that is hitting big tech as the Fed holds the line (in their posture anyway) to raise rates.
Note: The Fed started to Taper in Nov and that pretty much was the high for Tech. Some cause and effect there.
What was strange about the chart was the range in the product intraday was big but the close did not have much variation. The same can be said for the broader market, including the S&P 500.
In a Turbo Trade this week I tried to buy a UVXY Feb. 11 13.5/16 put spread for $1.14. I did not fill it and it closed $1.35.
I think simple put spreads in UVXY with a midterm duration of two to three weeks will work well.
The intraday vol will start to fade… eventually.
The Rundown
Capitol Gains w/ Frank Gregory
Option Pit DC and Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.
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- I added some cheap QuantumScape Inc. (QS) May calls to the portfolio.
- My Ford Motor Co. (Ticker: F) will need some help for a gain today.
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Power Income Trader:
Power Income Trader is a systematic approach to trading inflation. By pulling real-time data from the Fed, US Treasury and Gov’t, Power Income Trader alerts users on changes in money flow driven by Fed policy. Bill’s system puts you out in front of the most powerful money flow in the world.
Griff bought SPDR Standard and Poor’s 500 ETF Trust (Ticker: SPY) March. 4 425/421 put spreads for .97 or better. This is a paired hedge against Teledoc Health Inc (Ticker: TDOC) and Penn National Gaming Inc (Ticker: PENN) and he says, “IIn Stage 4 Deflation you want quality value plays against the broad index.”
Get on board with Griff in Power Income Trader.
Option Shopper
Licia Leslie puts on her best trading shoes to find option bargains using market making and charting experience. Generally debit options and spreads with low risk, high reward setups. Short hold times are the norm.
Licia shopped for Pfizer Inc (Ticker: PFE) calls and came up 78% green.
Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle/calendar trading vehicle. The goal is to teach students the best times to buy options.
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- I closed a very short term butterfly in SPDR S&P 500 ETF Trust (Ticker: SPY) this week for a 6% gain, but I stuck to the plan and closed Thursday. This morning the SPY fly trade would be a homerun.
- My Ark Funds Tech/Innovation Fund ETF (Ticker: ARKK) will close with a 14% gain.
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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.
The story in Pro is looking for good puts to sell, with long duration and well out-of-the-money when the volatility is so high.
Big Money Flow
Each week, Option Pit CEO Mark Sebastian looks at size institutional option buying with a twist. He mostly buys calls or puts to ride the large momentum trades.
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- Mark closed out his Occidental Petroleum Corp (Ticker: OXY) for 100% gains.
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Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle/calendar trading vehicle. The goal is to teach students the best times to buy options.
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- My Ark Funds Ark Technology and Innovation Fund (Ticker: ARKK) put flies and call will likely go out for a 10% gain. I own the call for a 10% credit after closing all the put flies this week.
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Volatility Edge & Volatility Trading Club:
Volatility Edge is run by Mark and uses the proprietary Option Pit VIX Light indicator to guide volatility trading. The Vol Trade Club is run by me (AG), and employs a long strangle strategy that seeks to use VIX future decay to pay for upside Cboe Volatility Index VIX, iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) and ProShares Ultra S&P Short Term VIX Futures ETN (UVXY) options.
The Option Pit VIX Light Is green for VIX today but I expect to change to yellow by the end of the week.
I am running two of three trades where I cannot lose and own VIX puts to Feb. 16 expiration.
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