Yo Pit Crazies,
I thought yesterday would be a volatility rout.
I really did.
You don’t get many headlines like this:
That should have been a VIX rout this week Yesterday, the Invesco QQQ Trust Series 1 (Ticker: QQQ) looked ready to go off a cliff, but it did not. It appears that Sen. Mitch McConnell caved on the debt ceiling issue so he must have looked at his 401k and decided no bueno.
I saw something nuts yesterday that you need to see, too. Mean reversion — the tendency to move back toward the average after a big jump or drop off — well, I have a picture of it.
Let’s take a look.
VIX Is Having a Hard Time Making Up Its Mind
Note the up again, down again VIX moves for the last 10 days.
If anyone wondered about mean reverting activity, this is the living embodiment of it.
Will they do a deal or won’t they? It is good for about 2 or 4 VIX points in either direction.
LivevolPro from Option Pit VIX 10-Day Chart.
Implied vol has been elevated for the intraday moves as the market swings to a drummer with a funky beat. If the current VIX activity is a tell, a break below 20 VIX should get us past the Congressional nonsense or a real lift to 25 or higher would signal the QQQ sell is going to reignite.
I like cheap VXX calls and puts for this week on a ratio. (Email me if you have questions about that.)
The Lesson: The VIX trades in ranges for events and when the event is over, it will break back down.
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.
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- Palantir (Ticker: PLTR) managed only a tepid move today so looking for some follow through tomorrow. I added a Moderna (Ticker: MRNA) put yesterday on the CEO’s call for the end of COVID.
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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 using the rally yesterday to take profits:
BTC $MOS calls +36%
And adding
BTO $PLTR Oct22 24C for 1.04
To Your Trading Success,
AG
