The craziest open in 6 years!

BY ANDREW GIOVINAZZI

August 6, 2024

Yo Pit Crazies,

With VXX running to near term highs, sign up now for our VXX trade. You will want to know when we add it.

Nothing like geopolitical risk to toss a match on a pool of gasoline. Traders just about lost their minds this morning with many of the major brokerages not accepting orders. I have to say Trade Hawk from Tradier and Interactive Brokers were both taking trades.

Market makers had their own ideas. It recalls the Soup Nazi from Seinfeld back when TV was funny. If the Soup Nazi did not like your order, no soup! This morning when VIX ripped to over 55 making a quick double, no Liquidity Providers in VIX were making anything close to a market and I don’t blame them.

There was no telling what was going to happen this morning. 3-4% SPX moves are pretty big and the question we all want to know is if it will keep going. After all, the market did not go limit down for the massive spike we had in VIX. Below is a chart of VVIX or the index that uses the VIX methodology. It is the VIX of the VIX. it made a high early Monday morning but feel off before moving back up into the close.

VVIX 20 day chart

What I like about this chart is that it tells how wrong volatility can be sometimes. I don’t know about you but it was way wrong.

Let’s see what the volatility in the Barclays iPath Series B Short Term VIX futures ETN (Ticker: VXX) is doing.

VXX IV is closing at a multi year high.

When you look at the chart below all options in VXX are crazy expensive. Traders that have made good dough this year selling VXX are giving it all back and then some this last few days. That is what makes trading volatility so fun is that there are good times and bad times to buy volatility product puts.

Right now is a tough time for two reasons:

The premiums are crazy expensive

VXX is decaying upward at $3 per week.

See the snap below, the VXX Sep20 straddle, the at the money call and put added together, is over $40 on an $80 product. If VIX stays orbiting above $30, VXX will just continue to climb in fits and starts. VXX puts will live to die that way.

Stocks are still weak into the close and IV still has a solid bid into the close for the last 2 days. This usually makes VXX tough to trade in one direction for a long period of time. A lot of bouncing up and down but the very expensive options premiums make it difficult to trade.

It will become an easier trade, just not today. On another note, VIX Sep18 20 puts are getting close to $1.00. Those could make their way into the Weekly Profit Cycles very fast with SPY put hedge.

Just remember the volatility on Monday morning was for a reason. It has not given up enough yet.

With VXX running to near term highs, sign up now for our VXX trade.

To Your Trading Success,