Yo Pit Crazies,
First things first – make sure you are signed up for today’s Fed Focus live session.
Head Income Trader & Fed Expert Bill Griffo is going live at 1 p.m. ET to deliver critical information ahead of next week’s Fed meeting.
If you have money in the market right now … you will want to be there.
We are a hair away from the S&P 500 (Ticker: SPX) reclaiming 4,000.
Stocks really want the sell off to be over, and we’re seeing a few of the leaders come back into the mix.
The bid for Apple Inc (Ticker: AAPL) and Nvidia Corp. (Ticker: NVDA) makes me think all that Congressional largess that Paul Pelosi bet on (when he conveniently happened to purchase millions worth of NVDA stock ahead of key semiconductor vote) might get those behemoths afterall.
When I think of companies that need aid, Big Tech is not at the top of my list.
That for sure is an interesting story.
But for us vol traders … The story is in the VIX.
A Long Strangle Is Just A Long Call And A Long Put
On its face, a long strangle is not a complicated strategy.
However, there are a few tricks I have learned over the years to make it even easier …
#1: One side has to outperform the other, so you must keep that intention in mind when setting up the trade.
#2: One side stops the other from a larger loss.
#3: I need to have an opinion to lean the strangle one way or another.
Usually I find it better to lean in the prevailing direction.
In the case of VIX right now, that is down.
Below, Vol Man is looking at the VIX Aug17 25-strike puts for $1.70 and seeing those are $2.00 in-the-money with VIX near 23.
The VIX Aug17 28/37.5-strike call spread is just $1.15, and other call spreads can be purchased for less.
The point is that VIX futures are getting more expensive as the front end of volatility subsides.
I take that to mean the market has expectations about VIX dropping next week post-FOMC.
And if it does, the strangle will pay nicely.
If the FOMC surprises everyone, I will be glad I have the call spreads to close.
The Rundown
Option Shopper
Licia is finding the groove once again with some cold, hard US Steel Corp (Ticker: X). She closed out a +77% gain on the July 29th 18.5-strike calls.
AG