Yo Pit Crazies!
I can be right about the data coming out on payrolls and inflation, and normally that presses volatility down since the larger issues that have plagued us are somewhat under control. I pressed some short VIX maybe a week longer than I should have. Here is the thing. All the data was pretty good.
Yet something spooked the market. Actually, not spooked. Just got folks to hit the exit. That exit is AI. Or all the assumptions of AI that investors had just up until December.
VIX hit a low on December 23, and then folks got cold feet. The spend to maintain AI dominance without any return metrics got investors downright nervous. Oracle (ORCL) has to sell $50 billion in bonds to keep up.
I repeat this story because it just so happens the exchanges are listing 0DTE options for the Mag 7, and what could be the most volatile period for them outside of April 5th and 2023.
It does make me think of the Internet Boom where folks piled into Yahoo (YHOO), Amazon.com (AMZN), Cisco Systems (CSCO), and Sun Microsystems (SUNW), who put the dot in dot-com. By 2002 all those stocks were down 80 percent from the highs. It was a damn mess as the Invesco QQQ Trust (QQQ) was trading below $20.
That’s right. It’s over $600 right now. Back then we could not keep up with the quote traffic we had on just four expirations and some LEAPS. Now we have daily expirations in all those Mag 7 names.
See below:
QQQ finished green on the day with 40 percent of its market cap down, save Tesla (TSLA). Old dudes like me remember what happened post-dotcom, and it was not pretty. 0DTE should end up being one of the best trading opportunities of the next year.
I have been trading some short-term options in the Mag 7 lately and plan to speed it up. Can 0DTE trading exacerbate a dump in these stocks? For sure.
But I’m pretty excited about next week: Starting Tuesday, Licia and Mark are opening up their 0DTE service all week for anyone to come and check out.
They’ll be going over what 0DTE is, why it’s useful, and why it’s the fastest growing financial asset that’s ever existed.
Right now money is flowing to value in other parts of the market just as it happened before. Berkshire Hathaway (BRK.A) had a standout 2002-2003 as tech got swallowed.
It could happen again, and that is what I will look at for Tuesday upon my return.
To Your Trading Success,
AG