Yo Pit Crazies,

I love my trading students. I think they are the sharpest bunch out there. 

As we gear up in OP Mentoring for the Div+ Portfolio Strategy, ideas are already pouring in.

The big item for today is the Weekend Effect.

You see, Friday was a killer … I will explain it in graphic detail and expound on my super students today.

Plus …

I think it is setting up for one of the greatest gamma buying opps in recent memory.

Weekend Effect Is the Liquidity Provider Keeping Implied Vol High Until the Last Minute

Note below the closing sigmas for SPX (otherwise known as the average IV for the term) on Friday. Particularly notice the near destruction of July 5. Traders kept the options pumped up and did not discount the weekend until the last three hours of the day.

Options don’t trade on the weekend, so market makers spend most of the week reducing option premiums until Friday’s close. This Friday they left the premium in until very late because the market has been very volatile.

Note the 3.5-point move lower in VIX below. 2022 has been the year of the head fake VIX moves, but traders took the IV down substantially.

Two- Day VIX with One-MinuteCandles

10 day realized vol in SPX is down to 23%, which is the lowest in a month. The last time it was this low, SPX was 4,000. If options stay in the low-20s on Tuesday, it will be a reason to get long SPX strangles.

I will introduce the Div+ Strategy in OP Mentoring on Wednesday. Be there!

The Rundown

OP Mentoring

This is my shoutout to my super student Victoria who wanted to close the put side of the SPDR S&P 500 Trust ETF (Ticker SPX) trade for a 60% gain on Thursday. 

That would have paid for 70% of the SPY calls I own with 1 week to go and would make the effective entry price .50 with them trading $1.20. 

I, meanwhile, tried to press the puts for a larger gain and got a lot less for them on a stop – so I have work to do Tuesday!

I think SPY strangles will be a thing to own next week, but Victoria’s idea was great to give me the position for almost nothing. Strike while the iron is hot!

Power Income Trader

Big Bad Bill Griffo rode the iShares iBoxx $ High Yield Corp Bond ETF (Ticker: HYG) July 22 75/73.5 put spreads for a 28% gain 

 

Option Shopper
Licia is back at Merck Co. (Ticker:  MRK) closing the  Jul01 92 puts for a 23% gain 

To Your Trading Success,

Ag