Yo Pit Crazies,

Mark and I are going live on Saturday to spring some trading secrets on you. Really it is about math and basic statistics. Do you want the stats in your favor or not? Find out on Saturday.

Sign up here.

The most important signal in the world is price. I can get into the nitty gritty of when the government, any government, tries to mess up the price signal for short term political gain, but it never ends well. I don’t use never lightly. Just today, bond yields are back to the pre-2008 levels. The whole monetary experiment is back to where it started.

The stock market will adjust to higher rates, as I think it has recently. 4200 seems to be the lower bound unless something else tragic happens. Implied Volatility is the markets way of pricing what is happening now or what will happen in the near future.

Learning to ready this simple graphic I post in the Trading Desk everyday will help a lot.

The difference between what happened and what the market thinks will happen.

The Headline News is Horrible

This goes to sentiment. Rates were above 5% for the first 10 years of 2000s and things were fine. Israel and the Middle East have been a hot issue for years. What is going on is not new but more about the potential for uncertainty. It seems bad things will happen faster.

When VIX9D, VIX calculation on 9 day SPX IV, is higher than the 30 day VIX, that means traders are paying up money for something to happen sooner rather than later. Even if that does not happen, traders are paying up.

I know that before I put the trade on so I know something larger needs to move in order for the trade to pay above what it is decaying every day. Every trade has a cost and longer something does not happen, the trade costs more.

This is the topic for Saturday. When is a good time to trade an option. When is the opportunity better than normal? Overall stocks are not selling off but headline news is keeping them held back. Like a rubber band ready to snap as traders see a larger move than is currently happening.

The Jpow remarks on Thursday could be a catalyst. Saturday’s class is to learn how to price a trade.

To Your Trading Success,

AG