BY ANDREW GIOVINAZZI
May 20, 2024
Yo Pit Crazies,
If you missed my Gamma Bomb tutorial on Thursday check it out here with Hannah and Mark.
On Friday I put out a Gamma Bomb style trade in Weekly Profits cycles. Stocks are at all time highs and VIX is at the low of the year so I thought this would be a good time to start. We need extended lower implied volatility for the Gamma Bomb to go off but after seeing some stats from Mark on how large 0DTE volume is i think it can happen sooner.
Below is a chart of the current VIX curve. The VIX closing price is in green and all the VIX futures are represented by the yellow curve. Slowly but surely the VIX curve decays to the green VIX line.
Closing VIX curve May 17, 2024
How does this help me with trades to take advantage of the Gamma Bomb? It is clear the VIX curve decays and anything that decays should provide income.
How do I get that income? What do I do with that income?
All of VIX options price from the VIX future
This simple fact means when the VIX curve is shaped like it currently is, the underlying price for VIX is higher than the cash price of the green line. If I buy VIX 14 strike puts for the Jun cycle the underlying price is 13.61 but VIX is 11.99. That is 2.01 (14-2.01) of intrinsic value but the put is only 1.33. As time passes, the VIX put will slowly decay “up” to $2.01.
Why is that important? I go spend those dollars on S&P 500 Trust (Ticker:SPY) puts. Those SPY puts will pay big when the market has the inevitable spiral down. Even if only for a day or two. That is all I need so come join me in Weekly Profit Cycles.
To Your Trading Success,
-AG
Andrew Giovinazzi
30-Year Trading Pro
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CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain