Repo Madness.

Yo Pit Crazies,

Every time the Fed does something odd, I think it is another reason for VIX to stay elevated.


But I like to consult with Option Pit Head Income Trader Bill Griffo to make heads or tails of it.


And this popped up in the Pro Chat yesterday:



Like I said earlier this week, the Fed is holding the ball and they are not letting go.


Does this mean we go up, down or sideways for the S&P 500 (Ticker: SPX) stock?


Well, I think we go sideways.


There might be some up and down in SPX, but the Fed really does seem to be able to control things — in the short term, at least.


And that brings up some trading ideas.  


If I think there is some short-term sideways action, I want positive theta trades.  That means trades that pay me if the market is not moving very much.With VIX making near-term lows that is mostly going to be a calendar-style trade. I outline that here in a Trading Legion session. 


Bottom line: I want to get paid while the market decides what it wants to do


In the Trading Legion session above, I bought six SPDR S&P 500 ETF Trust (Ticker: SPY) July 02/July 09 418-strike put calendars, as 420-strike SPY has been sticky, and I added one upside SPY July 09 426-strike. 


If we break out to new highs, I will probably break even …


But if the pattern of test and retest 4,200 SPX holds, the calendars should pay nicely.


The Rundown


Robinhood Trader:

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

      • Mark closed a ProShares Trust Ultra VIX Short Term Futures (Ticker: UVXY) for a 50% gain yesterday. 
      • He has nice looking long call trades in Ford Motor (Ticker: F) and ExxonMobil (Ticker: XOM).

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.

The live trade log is here, and I’ll have a full recap for you every Wednesday.

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. 


Most of the commodity stocks are making a comeback.


I saw a huge call buying in Vale S.A. on Wednesday …



That is a name on the Power Moves Portfolio list that I would like to own, so that should be an add today.


An idea from around the room:

      • Buy-to-open US Silica Holdings (Ticker: SLCA) shares at $12.81. I am long some SLCA Sept 17 13-strike calls.

Trading Legion:

The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.


Volatility Edge/Volatility Trading Club:

The Option Pit VIX Light is still red, and the Cboe Volatility Index (Ticker: VIX) broke 16 momentarily on Wednesday. So, 15 has a good chance this week,  and we are set up for that.


Usually a drop like that precedes even bigger drops in VIX.


VIX imploded in very normal market action yesterday,  which is more like a summer jaunt.


Mark closed his Trade No. 98 UVXY July 02 31-strike puts in for $3.20 today — for a 50% gain!


For the Volatility Trading Club:

      • Trade No. 250 is going well …
      • It’s the  iPath Series B S&P 500 VIX Short-Term Futures ETN (Ticker: VXX) June 25/July 09 30-strike put spreads for $.85 with a call hedge.
      • VXX is still dropping and I sold a second set of puts at 1.50.  I am in cruise control on this position and a 1.75 close on the balance will give me the VXX calls for a nice credit.

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,



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