Yo Pit Crazies,

Licia and I will do Big Money Shopper tonight at 7pm. I will channel my best Mark and companion on BMF to represent the flow side.  Be there!

Consumer Price Index (CPI) is a big number for Friday.

Just the hint of a pumping economy sent stocks down 1.6% on Friday and the S&P 500 could not recover by Monday.

I thought there was a trade for it in the Pro Plat class yesterday when I took apart the calendar.

Let’s see how that went

The Calendar Is A Tough Trade Into the CPI Number

To be honest, I thought the calendar would be an easy trade here.

There was a date on the calendar (no pun intended), and I thought to sell the options on, or in front of, June 10 and buy the following week.

It was not that easy.

The liquidity providers (I used to be one of those back in the day) were not pumping any extra juice, or option premium, into this week’s options.

Why?

As volatile as we have been lately, they are assuming a quieter week of about 23% implied volatility. Thirdy-day realized vol in SPX is 32%, or almost 2% per day. That is the most volatile period since March of 2020. War, inflation and supply chain shutdowns are all playing a role.

Back to my calendar, I could not find any edge that was tradable. That means I could not buy cheaper volatility than I was selling, so I could not justify the entry.

Here’s the video where I break it all down.

I do think this CPI number will induce a change in implied volatility.

If it is terribly high, the die is cast and the Fed will squeeze rates higher, pushing stocks below 4,000. If the pace is subsiding a bit, we might see a 20 for the VIX.

To Your Trading Success,

AG