Yo, Pit Crazies,
Below you’ll see the tale of the tape.
And it is not the tape of a bull market.
Learning to read this tape is helpful for learning to trade options. The Trading Desk is a good place to do that.
When we set up our Trading Desk trade on Tuesday, our idea was a short delta in S&P 500 Mini SPX Options Index (XSP) and then a short delta in the VIX.
It’s what I like to call a “trading bargain.” That is, either the market or the vol the volatility will drop … and we’ll collect on the one that drops the most.
That is common play in bear markets or markets that lack direction.
Stocks opened up yesterday on Microsoft (Ticker; MSFT) coming in with slowest growth in years – but it was growth, and in search no less. So stocks jumped in the morning.
Only to end the day like this …
Meta Inc. (Ticker: META) led the tech charge at the close. Will today end the same way?
Investors Are Paying Up for Any Growth
Say what you want about Mark Zuckerberg, but the man can pivot.
Pivot to the Metaverse, pivot away from the Metaverse.
I have included a handy Vol Man chart for the post earnings actions:
That is META going to the moon on 3% revenue growth.
Granted that stops a long decline, but Facebook is back to being Facebook for the near term.
That is not really growth and I think that is the issue right now. Companies are not doing as bad as expected, which means people are working. If my state is any indication, hiring is a dire issue of no workers. The job market is still firm.
Most of the earnings were not too bad and most banks did better than people expected so why the poor showing in the banks yesterday?
My only answer is the Fed, the Fed, the Fed. Traders are once again hoping to get the rate hikes to stop on May 3 and J-Pow will not because he will not go down in history as the Hyperinflation Jerome.
If he does stop, it’s 4200 and off to the races – and gosh knows what happens then.
If he does not – which, as I said, is what I expect – it’s more of the same we saw yesterday: grinding markets.
The Rundown
Power Income Trader
Bill is still kicking the short term trade in the bottom using option flow. SPX Apr25 4130/4135 call vertical spread closed for a 100% return on credit.
To Your Trading Success,
AG