Silver Tongue Devil

Yo Pit Crazies,

I had Bill Griffo in the Trading Legion room on Wednesday, as our weekly footprint continues to grow.

Four out of five days each week (at minimum!) there will be very live and very cool content.

If you’re not a Legion member, I highly recommend you check it out.

While I’m waiting on my partner Frank Gregory to weigh in on the infrastructure bill drama — make sure you read his Power Moves letter later today — Griff had an interesting take on things, noting that money is again buying commodities and selling volatility.

The market seems to be slowly undoing everything that happened over the last week or so related to the Covid-19 Delta variant.

I’ll show you why I think that is the case — and what to do about it …

Plus I did a special class on skew for Trading Legion that you can access here.

Going Back

Check out this 20-day VIX chart … 

VIX 20-day chart with 1-min candles.

Notice above how VIX is collapsing almost as fast as it went up.

That is not normal.

I take it as a sign traders are fading the Delta variant issues …

Politicians could still overreact — hello, California masking policies — but for now it is not happening on a large scale.

A big surprise would be that we see new lows in VIX. The lingering volatility is most likely what is happening in DC with the continued dithering over the infrastructure bill.

For a clue there look at iShares Silver Trust (Ticker: SLV) chart. It looks suspiciously like the inverse of the VIX chart:

SLV 20-day chart with 1-min candles.

There was a panic on growth, and I think Griff was right to point out that if the Delta variant is not a thing, SLV should be back to the 24s … 

And Griff but together a nice trade in the Trading Legion today:

      • Buy SLV Aug. 13 23.5/25.5 call spreads and 22-strike puts for $.60

The Lesson: Sometimes things go right back to where they came from.

Trade Goody Report from 07.21.2021 close

Check out the trade report from the Trading Legion session/OP Markets Show on Tuesday. Some nice bucks there from a market-neutral book of trades:

Mark: Buy RCL Sept. 17 75/90 call spreads for $3.60. Up 80%.

Mark: Buy XLE Aug. 20 48.5-strike calls for $1.61. Up over 50%.

Mark: Buy VIX July 21 19-strike puts for $4.10 as a cheap flyer into VIX expiration. With an $18.90 VRO, this trade is event

Mark: Buy NVDA Aug. 13 135/155/175 put flies for $2.55. Down 50% Wednesday, but with my STOCK HEDGE, this trade is also even. I also sold some stock today for a profit.

The Rundown

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 Power Moves Portfolio trade log is here.

Ford (Ticker: F) just bounced off of $13 like a rubber biscuit.  I looked  at selling five F Aug. 20 11/13.5 put spreads at $.45, but settled on the F broken wing butterfly 14/13/10 for $.10.

I think F will just coast after earnings and I can start a wheel or call spreads with the money I make on the put butterfly. 

F is down from $16 and I still like the green energy play, which remains on the front pages. F is cheap enough with our dollars to make a nice wheel trade should we have to. If F rips into earnings, we can close the puts early.

Sharp Bets:

Each week, Option Pit CEO Mark Sebastian looks for low-volatility, mid-term duration call buying and put buying opportunities.

      • Closed half of the SPDR Select Sectors Energy (Ticker: XLE) Aug. 20 48.5-strike calls for a 50%+ gain.
      • Still riding the Marathon Oil Corp (Ticker: MRO) calls, which are limping. But we did take in a 40% gain so far, so we have a shot at a decent gain if MRO gets back to $14 next week.

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. 

The Pro Room was buying Pfizer (Ticker: PFE) puts as a fade on the Delta variant, plus 1×2 put spreads in VXX also targeting a $28 low for next week.

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

      • UVXY is still producing with a one-day UVXY July 23 28.5-strike return of 31%.

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.

      • Apple (Ticker: AAPL) call calendars popped yesterday, got a second shot and ended up with a 13% return. I chose just to close the 143-strike put after AAPL did not sell off.  I turned the small loss into a gain.

Volatility Edge/Volatility Trading Club:

Volatility Edge is run by Mark and uses the proprietary Option Pit VIX Light indicator to guide volatility trading. The Vol Trade Club is run by me (AG), and employs a long strangle strategy that seeks to use VIX future decay to pay for upside VIX, VXX and UVXY options.

The Option Pit VIX Light Is Red as the Delta variant flamed out fast. 

For the Volatility Trading Club …

      • I added some 1×2 put spreads — long one, short two in VXX — with a $28 target price for next week.

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,

AG

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