The Fog of War

Yo Pit Crazies,

 

This three-day weekend reminds me of the run-up to wars past.

 

The first and second Gulf Wars were tough times.

 

And the countdowns to those conflicts share many similarities with what’s happening today in eastern Europe.

 

Now, I don’t believe Russian President Vladimir Putin will go through with an invasion of Ukraine.

 

Surely cooler heads will prevail.

 

But it’s the uncertainty the market doesn’t like.

 

And we have a lot of it.

 

So, either way, we need to prepare.

 

This is how to do it …

 

Uncertainty rules the market right now

 

The big question is, what does Putin want?

 

Because he must want something. (And I imagine taking big casualties invading Ukraine isn’t it.)

 

But nobody really knows.

 

As a young floor trader I was taught to price uncertainty.

 

After all, my first couple months on the Pacific Exchange floor were the lead-up to the first Gulf War 1.

 

I remember clearly that when the USA went in, oil prices tanked $20 and the Dow Jones Industrial Average went up 100 points.

 

Big moves back then. (The PCX floor traded 150,000 contracts that day. These days Ford Motor Co. (Ticker: F) might trade that in the expiring weeklies.)

 

My point is, the more things change, the more they stay the same. Jitters are expected and don’t expect a rebound in S&P 500 until a resolution occurs.

 

As much as I thought the VIX would tank last week, the continued escalation, at least in the news, will keep the “fear gauge” from going down.

 

For the first time in a while, I am pricing VXX call calendars with cheap long-term VXX put insurance.

 

Like I said, I have seen this movie before and my hope is it has the same happy ending.

 

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.

• • • Ford Motor Company (Ticker: F) put diagonals and a long call are looking good as F might spin off its EV business.

 

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’s gold miners have been money.  
    • We closed  Xtrackers Harvest CSI China 300 A Series ETF (Ticker: ASHR)  calls and SPY June put spreads.
    • The pair gained 15% on risk dollars so a good start to our Fed Focus series that launches on Thursday. You can still join us – and at a discount!

 

Option Shopper

Licia Leslie puts on her best trading shoes to find option bargains using market making and charting experience. Generally debit options and spreads with low risk, high reward setups. Short hold times are the norm.

 

• • • The Shopper is still long Citicorp Inc (Ticker: C) puts, and banked 100% on the closed position.

 

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 looking for more strategic plays Friday with some longer term ideas.

 

Chris won the #FridayAlgoChallenge, jumping on some ProShares Ultrapro QQQ (Ticker: TQQQ) calls midday and closing for a bang.

 

 

From our ace future trader Neil:

What say you on Tuesday, Licia, in Option Shopper? Inquiring minds want to know!

 

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.

 

• • • I added a short put in Petrobras SA (Ticker: PBR) and will use the proceeds to buy a call if it pulls back, but that has not happened yet.

 

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 Light Is Yellow As VIX Bounces Around With SPX.  Up and down is what to expect given the news.

 

• • • VTC Trade No. 282 is turning long VXX delta with the rally in VXX.
      

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