If stocks are not going down, they are going up!

BY ANDREW GIOVINAZZI

May 15, 2024

Yo Pit Crazies,

Check out the Trading Desk if you want to learn how to trade and navigate these volatile waters. Earn while you learn! The trading record is here and it is not too shabby. Just click Mark’s head even though I share it with him.

Starting off as a clerk and then progressing to an option exchange member way back in 1989 had its advantages. When I started trading, there were veterans there from the P-Coast equity floor that had been around during the 60’s and 70’s before migrating to options.

I got worldly wisdom like “There are more sellers than buyers” or my favorite, “If it is not going down, it is going up.”

What they meant was the action in stock prices. Every action has an opposite action. Trading volatility helped me put some context around the action. Volatility just tells me how hot folks are for a stock or commodity. In the case of Gamestop Inc (Ticker: GME), just the idea of a stock where the IV goes to 600%. No real company has a 600% volatility. That is all greed and speculative madness.

Below is the S&P 500 Trust ETF (Ticker: SPY). It is about to close at an all time high. I am riding a long SPY strangle, long a call and a put, in the Trading Desk.

3 month chart of SPY with 60 and 90 day implied volatility (IV)

And I cannot find 1 piece of news why that should be.

So why is it?

Price action and pattern is the most important thing to traders

Investing is about time, capital appreciation and reinvesting dividends and call premiums. Time does the work. I can have all the opinions about why government spending is not great long term but right now stocks are going up. Why? Who really cares if I am trading.

Being short SPY is costing money and right now PPI and inflation numbers have not mattered much mostly because they are somewhat in line and not getting nuts. That is the pattern and it could change but it is not happening now.

What I see is confirming volatility both in the down market last month and the recovery market of just the last 2 weeks. SPY is up and IV is down. That is also how VIX can make a new low and we can keep riding our Trading Desk Proshares Ultra Short Term VIX futures ETF (Ticker: UVXY) puts.

The CPI will come out, it will be a bit hot but the market won’t care. That is the current pattern and I don’t see a reason for it to change.

To Your Trading Success,

-AG