Yo Pit Crazies,

If you have something to do tonight at 7, drop it and come see Licia talk about trading candles and options.  She is the best candle trader out there.

A lot of finance is just figuring stuff out.  So after 30+ years of trading options as a floor trader and now retail trader, things still surprise and intrigue me.  I am always learning and every once in a while teaching.  When I was a floor trader, VIX as a trading product did not exist yet.  At Option Pit I learned it all the old-fashioned way, putting positions on and seeing what works.

How can anything that moves like the chart below be interesting?  There are no compounded returns.  What the heck!   I say trading is not investing.

VIX 5-year chart

Take what your product gives you.

VIX gives a lot…and here’s what I mean…

Consistent Indicators are the best

Below is a screenshot of the indicators I follow.  Mark and I will probably do a greatest hits of VIX indicators in the near future but for now, I will introduce one of my favorites.  It is the 9-day VIX over the 30-day VIX, which everyone calls VIX.  The most important thing I can say is when 9-day VIX is > 30-day VIX.

That usually means realized or underlying volatility will be higher than is currently priced by the options.

That means SPX is slated to move more than 14% vol or just under 1% per day.  The Fed is talking today and expects some big moves over the next 2 days.  I think Mark and I got set up well in The Trading Desk this week so we should see some big moves.  No rate hikes and we see 4500 SPX…

That is what the VIX tea leaves tell me.

The Rundown

Win the Week closed a 1-day hold Invesco QQQ Trust (Ticker: QQQ) put spread for a +80% gain … Power Income Trader closed an Ishares iBoxx $ Investment Grade Corp bond ETF (Ticker: LQD) put spread for a 77% gain.

Griff will be talking about the Fed and market reactions this afternoon in his Power Income Trader show — sign up here if you aren’t already a member.

To your trading success,

AG