NFP Bum-Rushes the VIX

Greetings Pit Crazies,

On a week when VIX should be lower, it ain’t.

Maybe this Delta variant COVID thing is making the algo touchy.

Or at least keeping the vol sellers at bay.

That alone is not quiet enough to keep VIX this bid into the vaccinated USA.  

Touching base with a vacationing Mark, he reminded me about the non-farm payroll number out on Friday.

Also, we have an ADP private payroll number on Wednesday morning, so players might get a clue how NFP will shape up.

Of course I have a trade for that … and the Power Moves Portfolio roundup!

VIX should be around 14 by now with the 4th of July coming up.

It is not. (Weekend effect and all.)

Any time VIX doesn’t do what it’s supposed to do, there’s a reason.

For instance:

      • If the S&P 500 does nothing, VIX should drop. But …
      • If a calendar event is big enough VIX, VXX and UVXY generally rise into the event and crash afterward.

I already own some VXX strangles in the Volatility Trading Club, but a decent idea would be to buy a VXX call today, say one VXX July 09 30-strike, and then buy 10 VXX July 02 28-strike puts for .10 or less. 

Depending on where things land after the NFP one side should pay well …

The reason being, I expect VXX to be $28 at least by Friday, but there could be some fireworks in between.

When and if the fireworks hit, close the calls and keep the puts for a credit.  

The Lesson: Oftentimes what goes up — especially with vol — goes on down again.

The Rundown

Wednesday Power Moves Review!

Power Moves Portfolio w/ Frank Gregory
Option Pit DC and 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.

Wednesday can only mean one thing — it’s lasagna night in the Giovinazzi home.

No, wait. I mean …

It’s time for the weekly Power Moves Portfolio Update! (The live updated trade log is here.)

      • Coinbase (Ticker: COIN) is still on my radar, but look at the jump in volatilities below.

The stock is up 20% from the lows in three day days so maybe a call calendar to bring in some theta again. 

Coinbase Inc (COIN) 20 day chart, big jump in IV on the right

      • BWX Technologies (BWXT) keeps dropping, but look for a trade there too in the coming days.
      • Net we own some calls in BWXT, GE, Taiwan Semiconductor Mfg. (Ticker: TSM)
      • We own two SPY puts around the 400-strike.
      • We have some short put spreads for theta in GE and CLF now, which I might have to roll at this rate after Jul16 expiry. As income trades, so far, no income.
      • I filled BWXT July 15 16-strike calls and they are toast.  This name is intriguing because of the nuclear nature of its tech. Damned if I can make an option trade here. Even if I sold some Aug. 20 55-strike puts, I know it would be near impossible to manage them.  Sometimes liquidity and movement dictate what is possible.
      • We are back in Cleveland-Cliffs (Ticker: CLF) with a sale of five CLF July 16 15-/21-strike put spreads at $.96. I spent $.38 to hedge them as CLF dropped 20% in two days. After the Fed testimony, I expect CLF to get back to where it was.
      • GE is a play on green energy. We own two GE Sept. 17 14-strike calls for a credit and short two GE July 16 12-/14-strike put spreads at $.62. North of $13 on some jet sales is helping.
      • We bought two TSM July 21 125-strike calls for $2.51. TSM as a stock has been tough, stalling at $119 twice. On the next TSM rally I will just close these calls and be done.

By the way, be on the lookout for some big Power Moves Portfolio news coming soon …


To Your Trading Success,

AG

 

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