Some Volatilities Are Really Low

Hello Pit Crazies,

 

Another weekend in the paradise of summertime Maine … and I still can’t get Griff’s Dollar Mess out of my mind.

 

Even fishing is not helping!

 

Also, I want a trade — but I want the market to pay for it.

 

I keep looking at Mark Sebastian with his frickin’ UVXY puts.

 

That’s how I am going to do it. That’s the ticket.

 

I’ll explain …

 

Trust the Process


What Mark is doing in UVXY is a process.

 

And all good trading has a process. 

 

 

Mark using the Option Pit VIX Light in the Volatility Edge program is a process. 

 

The light is red for VIX — meaning calm seas. During such periods, he leans short the vol products and will buy a bit of hedge like Trade No. 96. That one is down and will probably be a 0 — that is the job of a hedge.

 

Trade No.

Date of Entry

Time of Entry

Date of Exit

Time of Exit

Underlying

Buy

Sell

Exp.

Strike

96

6/3/21

8:31

   

VIX

1

 

Jun16

20/30 call spread

Volatility Edge Trade No. 96

 

But he is up and winning/closed in trades 90, 91, 92, 93, 94, 95 and 97. That is something, since the long call spread makes it easier to stay in the puts. That is the job of a hedge.

 

Trade No.

Date of Entry

Time of Entry

Date of Exit

Time of Exit

Underlying

Buy

Sell

Expiration

Strike

97

6/11/21

8:45

   

UVXY

2

 

Jul2

30 puts

95

6/1/21

11:53

   

UVXY

2

 

Jan21

30/15/5 put flies

94

6/1/21

11:53

   

UVXY

2

 

Jul16

31/25 put spreads

93

6/1/21

11:53

6/7/21

11:37

UVXY

2

 

Jun11

35 puts

92

5/28/21

8:48

6/10/21

2:12

UVXY

2

 

Jun11

34 puts

91

5/27/21

8:51

5/28/21

8:42

UVXY

1

 

Jun4

37 put

90

5/19/21

10:42

5/26/21

11:20

VIX

5

 

Jun16

18 puts

Volatility Edge Trade Nos. 90-95 and 97.

 

Even with VIX at a low, the vol products are still melting, which is why Mark is leaning short in the vol products. 

 

By nature, UVXY erodes from its long futures positions. VIX can be dead and UVXY can still lose value every day — at a rate of $.29 per day. Mid-July is six weeks away, so $.29 per day x 5 days x 6 weeks … and UVXY is $9 lower than today.

 

The UVXY July 16 25-strike puts are $1.40, so they can be worth $4 just on decay alone.

 

If they double in price I will be thrilled.

 

Instead, I am going to take the money and buy SPDR Gold Trust ETF (Ticker: GLD) July 16 180-strike calls for $1.20. With any real drop in VIX, it’s possible I can close the UVXY puts next week.

 

Then I have the GLD calls for free. 

 

That is the process. That is what I will do!

 

The Rundown

Power Moves Portfolio

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. Aiming for positive theta trades and using that income to buy calls is the big growth opportunity.

Note below some short term calls are just stalling, so I will kill them this week. Both Taiwan Semiconductor (Ticker: TSM) and Palantir (Ticker: PLTR) are in that category. 

I own both of these stocks in an IRA, but short term they are BUY THE DIP-only stocks. Maybe this week they’ll break out as the market rips to new highs.

Zscaler (Ticker: ZS) is my new idea to jumpstart the GlobalX Cyber Security ETF (Ticker: BUG) calls that I own.

See Licia and I break down Zscaler here.

      • I tried to buy the ZS Jul02/16 220-strike calendar spread for $1.50, but it went unfilled into the close.

Zscaler implied volatilities look like 2-year lows — a perfect calendar setup.

I did not add a QuantumScape (Ticker: QS) trade, but will try again Monday.

Net we own puts in Ford (Ticker: F), Invesco QQQ Trust (Ticker: QQQ), TSM and PLTR.

Net we own some calls in BUG, General Electric (Ticker: GE), TSM and PLTR.

We have some short put spreads for theta in BP (Ticker: BP), GE and, now, Cleveland-Cliffs (Ticker: CLF).

      • We are back in CLF with a sale of five CLF July 16 15-/21-strike put spreads at $0.96. This is a big chunk of capital, and we will adjust with a put if we need to. The implied volatility is super high in CLF, so we’re just looking for the $20 area to get back in.
      • BP seems to be moving up and sideways. This trade is up about 15%, plus we own the QQQ puts for a bonus.
      • BUG is making a new high and our four BUG Sept. 17 28-strike calls for $1.25 are up $.50, or about 30%. The stock is illiquid, but the IV in the calls are cheap, so we thought this was the best way to play the Ransomware story. We’re looking for a double on the calls.
      • F stalled, so we just took the money and moved on. We own five of the F June 18 13-strike puts, so if F dips we will sell into that.
      • GE is a play on green energy.  We own two GE Sept. 17 14-strike calls for a credit.  We added a sale of two GE July 16 12-/14-strike call spreads at $.62. The idea is to help out the calls a bit in the premium area.
      • We bought two TSM July 21 125-strike calls for $2.51. TSM as a stock has been tough, stalling at $119 twice. We will give it one more rally shot this week, or else we will close and just look for a lower, more opportunistic entry.
      • PLTR stock has stalled and we have just one call here and two puts. Stock is stuck, and this trade seems dead, but we have another week to run on the puts so we will just hold this for now.

Here’s a look at the Power Moves Portfolio track record and positions.

To Your Trading Success,

 

AG

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