Yo Pit Crazies
Macro Griff (Option Pit Head Income Trader Bill Griffo) is doing his big show on trading inflation for profits TONIGHT.
I think I gave him that nickname and he is the hottest trader at Option Pit currently.
Register here so you don’t miss out on the gains he continues to produce.
The day after the Big Spend (infrastructure bill) went down, SPX and VIX had a personality conflict.
Both SPX and VIX rallied at the same time. That is normally not good.
You would think all these COVID pills coming out would make VIX drift lower, but that is not the case yet.
I addressed this issue when I filled in for Mark during yesterday’s Vol Edge session. Is it enough to freak the market out for a couple more days? Is something going on at the Fed that is fishy?
Take a look at the Vol Edge class (I link to it below). Something is up, but not what you think.
Four Fed Governors Are Leaving
The Fed is replacing four governors! Yes, I said that!
Overall, Jerome “J-Pow” Powell has done a decent job at the Fed, given the small distraction last year of a global pandemic.
As of now, it is still going on in various degrees but he did signal bond buying was coming to an end next year.
Meanwhile, it does seem like Fed governors have a nasty insider trading habit.
Some are leaving.
That is an increase in certainty.
Four new (possibly inflation questioning) Fed governors could put a totally different spin on how the next year plays out for rates.
The market is looking for higher rates and a sign of normalcy. This big rotation at the top of the Federal Reserve Board looks a little jiggy to me and VIX does not like it.
A second possibility is the blow-off upside the market keeps having. Liquidity providers are running out of tech/semiconductor calls and stocks keep going up. That will keep a bid for SPX IV stiff.
20-day VXX 1-Min Candles
The iPath Series B S&P Short term VIX futures ETN (Ticker: VXX) had several dips recently back to $22 as the Dec futures have taken control of the product.
Having that Dec future get back to those levels would signal new unease regarding new Fed players in my view.
There are a couple of trade ideas in there. The gist is lean short VXX with an upside hedge.
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.
- I closed some of the SPDR S&P Oil and Gas Explor& Producer (Ticker: XOP) January call spreads with the position up 15%.
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 Pro Room was looking at all the semiconductor stocks going to the moon and the RobinHood Inc. (Tick: HOOD) squeeze yesterday.
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.
- Mark started closing Canejo Corp. (CCJ) Jan calls for a 30% return so far. Uranium is getting a big boost lately.
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.
- I am riding Vale SA (Ticker: VALE) as a commodity play and rolled some long puts down to take profits. Still a ways to go in this one, but a solid up day.
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 Red but the VIX up/SPX up gives pause.
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,