Yo Pit Crazies,
Bill Griffo is the newest star in the Option Pit Pantheon and he had another humdinger of a show on Friday. Four easy steps to massive gains? Yes, please. Check it out here …
Elsewhere, that odd expiration cycle phenomenon happened yet again this week. There was a weak selloff into ordinary expiration and then, like magic — *~*poof*~*. Even with higher inflation and folks leaving the workforce, we rallied yet again with a 4,700 S&P 500 (SPX) well within reach.
Note how the market leaders are acting like Apple (Ticker: AAPL), Nvidia Inc. (Ticker: NVDA), etc.
Hard for the market to go down without those stocks selling off.
The old saying that the market climbs a wall of worry has never been more true. VIX is within 1.5 points of the year low, so from a vol point of view not much interesting. However low vol means cheap options.
Let’s take a look at some goodies in the SPX and SPDR S&P 500 ETF Trust (SPY).
SPX Options Are Dipping Into the Single Digits
What I mean by that is the implied volatility of the SPX options are in the 8-9% range.
That is very low with expected move only ½% per day or around 23.5 points.
SPX Term Structure IV from LiveVol Pro
This should set up well for a nice long call/long OTM put spread strategy for the SPX this week.
The market is discounting the Thanksgiving options and, really, I want to target a call that will pay well on a run to 4,800 with just a minimum hedge of SPX put calendars.
That is not a bad setup routine for a lot of the glamour equities out there too. If you are clever, the put calendars can offset most of the time decay from the call. Then let the market do the rest.
Questions about this? Hit me with an email.
The Rundown
Capitol Gains 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.
Mandiant Inc (Tikce: MNDT) made a two-month high on Friday.
Stocks currently in the CAPITOL GAINS portfolio:
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- Regeneron Inc. (Ticker: REGN) long COVID therapies
- Mandiant Inc. (Ticker: MNDT) long Cybersecurity
- PetroBras SA (Ticker: PBR) long oil
- SPDR Oil and Gas Explorers (Ticker: XOP) long oil
- Intel Corp (Ticker: INTC) long chip shortage
- Powershares QQQ Trust (Ticker: QQQ) portfolio hedge
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Power Income Trader:
Power Income Trader is a systematic approach to trading inflation. By pulling real-time data from the Fed, US Treasury and Gov’t, Power Income Trader alerts users on changes in money flow driven by Fed policy. Bill’s system puts you out in front of the most powerful money flow in the world.
Bill is smokin with a new long in GrowGeneration Corp. (Ticker: GRWG).
6 month GRWG chart with 1 day candles
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 using the rally Friday to take profits:
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- Ken A, on a hot streak lately, opened a small risk reversal in Pinterest Inc. (Ticker: PINS).
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Big Money Flow
Each week, Option Pit CEO Mark Sebastian looks at size institutional option buying with a twist. He mostly buys calls or puts to ride the large momentum trades.
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- Looking at PINS also adding growth stock, I mean bug growth stock Amyris Inc. (Ticker: AMRS) to the watch list here with big long call buying showing up.
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Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Gamma Radar to find order flow in active MEME names.
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- Mark is riding some Palantir (Ticker: PLTR) calls with the Trading Legion with stock holding here.
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Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle/calendar trading vehicle. The goal is to teach students the best times to buy options.
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- I rolled some short puts in PLTR Friday with the diagonal up 20% on risk right now.
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- My SPY call and put fly closed up 30% and I did hold the put fly to expiration instead of closing it out to see if the selloff got legs. We know that did not happen.
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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 Cboe Volatility Index (VIX), iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) and ProShares Ultra S&P Short Term VIX Futures ETN (UVXY) options.
The Option Pit VIX Stop Light Is Red and I expect several closes this week. Making new VIX lows would not surprise me.
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