Yo Pit Crazies,
Mark Sebastian has been talking about the Gamma Bomb for a while now. One of the conditions is starting to take shape now.
We need lots of low volatility, especially in the big indexes and the big names too. Low volatility happens when traders get used to the same thing happening everyday.
The chart below is an opportunity in the making. It’s been two years since traders have had this kind of lower implied volatility and higher stock prices – more like three years. The reason why demand for puts is low is because put buyers haven’t been getting paid lately. There’s a graveyard of put premium buyers in big name stocks right now.
AAPL 120 day IV with 2 year chart and 1 day candles
Apple Inc (Ticker: AAPL) IV120 Is At 3 Year Lows
Recall implied volatility is the prices traders are paying for a certain period of time. Right now, a trader won’t pay a lot because they think the stock isn’t going to move too much over a period of time. That goes for up and down.
Is AAPL stuck at all time higher going nowhere? Maybe, maybe not. The cost of those options is relatively low, and if you can find a way to finance the trade, which we do in the Easy Button, it sets up massive opportunities when the stocks do move.
I read somewhere this week that everyone uses Big Tech every day – search with Alphabet Inc. (Ticker: GOOGL), shop with Amazon.com Inc (Ticker: AMZN), etc. As the world economy grows, these tech names grow, so that’s the case for the big moves lately. We could be riding this train for a while longer before anyone wants to get off.
To Your Trading Success,
AG