BY ANDREW GIOVINAZZI
April 3rd, 2025
Yo Pit Crazies,
Right now traders are wondering if this big selloff is over. To be honest, it probably isn’t. Yesterday, the VIX9D-VIX indicator was signaling something extreme, reaching one of the highest levels of the year as I mentioned into the close. Looking at the chart below, it’s clear this isn’t over yet. If you’d like to use that indicator, it’s simple to set up on Think or Swim or TradingView.
At $432, the Invesco QQQ Trust (Ticker: QQQ) is indicating we’re in a bear market. Tariffs have hit many importers, including companies like Nike Inc (Ticker: NKE) and Gap Inc (Ticker: GAP).
Keep in mind that while the USA has tariffs on products from around the world, we’ve had a relatively open market—up until today. Not anymore. Heck, Mark grabbed a 300% gain riding the Big Money coattails in Gap Stores Inc (Ticker: GPS) because all their clothes are made overseas.
I heard that April 9th is the deadline for countries to change their policies, though that’s still unconfirmed. Part of this whole operation was to reduce the deficit and interest rates, and for now, that appears to be exactly what is happening. Congress has essentially checked out and left D.C., and unsurprisingly, let D.O.G.E. take care of all the heavy lifting. As a result, there’s little positive news to drive stock growth—at least nothing like what pushed us to 6200 in early February.
The question for me now is whether VIX will jump to 30 or more and take us below $500 SPY.
Now, let’s see how the volatility is pricing that.
There is a crazy amount of Implied volatility (IV) priced in the short term
When the VIX futures curve is this backwards, meaning short-term volatility is priced much higher than long term volatility, traders are expecting the bigger moves to continue. The trend for the VIX future decay is up as opposed to down.
The ideal trade right now is to buy May cycle VIX call butterflies for a low cost. That type of trade reduces the dollar cost while keeping up with the rise in VIX futures. SPY IV went up in all terms today, so do not look for any relief from markets yet. If anything, expect the swings to stay large.
To Your Trading Success,
AG
Andrew Giovinazzi
30-Year Trading Pro
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