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Is Omicron Killing the Santa Rally?

Yo Pit Crazies,

 

Licia had a gangbuster Option Shopper kickoff on Friday.

 

Mark and I joined, and it was fun and educational. 

 

Even I even picked up some candlestick magic.  

 

An old dog can learn new tricks!

 

It did not hurt that her first trade was up over 100%!

 

Some took it even further …

 

I’m sneaking you a link to get in if you haven’t already

 

But this is Last Chance City.

 

Elsewhere, I thought Santa was all-in on the rally Thursday and Friday.

 

Now I am not so sure.

 

Something is amiss. Let’s go see what it is.

 

VIX Futures Are Giving Conflicting Signals

 

The first thing Vol Man sees below is 19.35 nine-day VIX. (This is, as the name suggests, the VIX calculation for nine days out … and it is19.35.)

 

 

From there, he wants to see all futures upward sloping after the VIX index and all the futures following.  That means that all the short term IVs, and thus expectations, are for lower short term movement.

 

 

The December VIX contract with three days to go to expiration is a little under the cash. Usually low volatility numbers in the front terms produce higher futures prices from forward volatility. 

 

VVIX, the implied volatility of implied volatility, is still very high post-event, at 136.06. It should be close to 100, so there are still plenty of volatility buyers out there.

 

That means we could see a very bumpy week even with most of the VIX Curve sloping up in the future.

 

I mentioned sector rotation last week, as traders dumped some tech and moved into other areas. My suspicion now is that Western governments and some US states might overreact to omicron causing things to slow down again. That did creep into the picture late Friday afternoon.

 

Whatever the reason, all is not right for a post-FOMC smooth sail just yet.  

 

The Rundown

 

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.

 

      • The Queen of the Candlesticks is moving into Cliff Natural Resources (Ticker: CLF) calls. Zoom Inc. (Ticker: ZOOM) was looking bullish as well in the Friday Option Shopper kickoff.

 

Capitol Gains

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 added call spreads in Cliffs Natural Resources (Ticker: CLF), so with Licia we have a twofer going.

 

Other stocks currently in the CAPITOL GAINS portfolio:

 

      • Mandiant Inc. (Ticker: MNDT) long cybersecurity
      • PetroBras SA (Ticker: PBR) long oil
      • SPDR Oil and Gas Explorers (Ticker: XOP) long oil
      • Invesco QQQ Trust Series 1 (Ticker: QQQ) portfolio hedge
      • Canejo Corp. (Ticker: CCJ) long Uranium play
      • Ford Motor Company (Ticker: F)
      • Palantir Technologies Inc. (Ticker: PLTR)

 

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.

 

Bill’s take on Uranium Realty Corp. (Ticker: UROY) caught a bid Friday morning with most of the Uranium stocks.

 

And it’s not too late to catch his Power Income Trader program.

 

Pros can also check him out every Monday morning.

 

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 is jumping into the “Amazon of South Korea” Coupang Inc. (Ticker: CPNG)

And closed 8-of-10 Uber Technologies Inc. (Ticker: UBER) calls for 100%-plus gain.

 

Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Gamma Radar to find order flow in active MEME  names.

 

      • All Dec trades are wins so far and just looking for DraftKings Inc. (Ticker: DKNG) to make it 6-for-6.

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 took a peek at Licia’s picks Friday …

 

 

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.

 

I bought an Invesco Currency Shares Euro Trust (FXE) strangle that is looking up as it is short the Euro, which weakened on Friday.

 

Watch the session here. 

 

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 Cboe Volatility Index (VIX) future decay to pay for upside iPath Series B S&P 500 short-term VIX futures ETN (VXX) and Pro Shares Trust Ultra VIX Short Term Futures ETF (UVXY) options.

 

      • The Option Pit VIX Light Is Moving And Still Yellow – and as I mentioned up top, still a bit jiggy.
      • Mark is long a bundle of VIX puts that he will most likely ride to next week.
      • I closed Volatility Trading Club Trade No. 272 for a 19% gain Friday.

 

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

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