They’re Back!

Yo Pit Crazies,

 

I’m back!

 

And as I tried to get back into the swing of things Friday, I laid on the couch contemplating … my creaky back and meme stocks!

 

Too many backs there — but could the markets get back to normal?

 

By the end of the day Friday, the jury had spoken and the VIX was down 1.62 to 16.42, which is nearing a low since COVID started

 

That means something. If you want to find out what, read on!

Remember what the VIX is — a 30-day forward volatility index designed to create a smooth number for volatility and not move unnecessarily.

 

When it does, that’s a signal market sentiment is changing

 

      • A falling VIX number means that future moves will be less than now
      • A rising VIX number means that future moves will be more than now

 

Six-month CBOE S&P 500 9-Day Volatility Index (VIX9D) with one-day candles. Remember VIX is a 30-day number, VIX9D is a 9-day number.

 

What we have, is that in the very-short term, the market hit a new low into the close for volatility.

 

I know it is a weekend, but still, new lows are new lows. New lows in VIX, VIX9D or otherwise, are usually very bullish.

 

My sentiment is reflected in the Power Moves Portfolio below and my Volatility Trading Club trades and Trading Legion ideas — I am thinking of new highs in the S&P 500.

 

I will buy two SPDR S&P 500 ETF Trust (Ticker: SPY) June 18/Jul 02 430-strike calendar markets at $1.35 on the close and keep rolling the 430s. And I will buy one VIX July 21 25-/40-strike at $1.15 as a reasonable hedge, as it takes a long time for VIX calls to evaporate.

 

This most likely will be my VTC trade idea on Monday.

 

I have to believe one of these sides will make big money.  The funny thing is, this trade is positive theta — but also will perform in a big market swing up or down.

 

An Option Pit Pro Trade setup if I ever saw one …

 

The Lesson: A new VIX or VIX9D low is always significant because it signals a change in sentiment for right. Crazy things can always happen, but the forward sentiment change is what the market is telling you.

 

The Rundown

Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Radar to find order flow in active names.

      • Mark still has the mojo rolling with the tweaks he made to the Robinhood Radar. 

        • UVXY is the gift that keeps on giving. June 04 26.5-strike puts were bought for $1.60 and closed for $3 and $2. That’s a 50% gain.
        • He is currently long calls in Senseonics Holdings (Ticker: SENS), up 40%, Nokia (Ticker: NOK), up 15%, and back to the well in Blackberry (Ticker: BB).

 

Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.

 

Ford (Ticker: F) ripped up Friday, so I closed three of five calls in the F June 18 15.5-/14-strike risk reversal. Looking at a 50% win there on the second leg.

 

I am still riding the Ark Innovation ETF (Ticker: ARKK) strangle with the ARKK Jun 04 116-strike calls going out worthless and looking for ARKK to match last week’s highs.

 

Sharp Bets:
Mark Sebastian runs our marquee long option strategy for a once-per-week trade. SB specializes in low-implied volatility calls and puts, and managing trade size for a risk-adjusted options portfolio.

Mark added a buy of General Electric Co. (Ticker: GE) July 09 14.5-strike calls this week.

 

Pro Trading Room:
This 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 tone was mostly bullish this week into the close.

 

      • Biogen Inc. (Ticker: BIIB) is coming out with their Alzhimers drug results next week.  We have had Pros riding the BIIB Jan. 2022 265-strike calls for quite a bit.  I added the iShares NASDAQ Biotech (Ticker: IBB) July 16 160-strike calls into the close. I figure I can sell puts against them if BIIB news is bad, which I don’t think it will be.

 

The Power Moves Portfolio:
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. We are aiming for positive theta trades and using that income to buy calls is the big growth opportunity.

 

We’re up 15% in the Power Moves Portfolio, and we’re allocating $20,000 to the strategy for now. More on that for my Monday Option Pit Exclusive.

 

Here’s the latest …

 

Looking at Coinbase (Ticker: COIN) for this week, but all the meme action is making me wait for an entry.

I caught Frank’s bug and bought four Global X CyberSecurity ETF (Ticker: BUG) Sept. 17 28-strike calls for $1.25.  The stock is illiquid, but the IV in the calls is cheap so thought this was the best way to play the ransomware story.

Ford Motor Co. (Ticker: F) is moving out and I sold out 3 of 5 the call part of my trade at $1.06.  The trade is semi-mirroring the ratio I have in the Trading Legion.  Up 33% on the first leg and 88% on the second.

General Electric Company (Ticker: GE) is a play on green energy. I own two GE Sept. 17 14-strike calls for a credit.

Cleveland Cliffs (Ticker: CLF) broke out and way above the strike in my spread, so I took the $100 gain and bought a midterm call, 1 CLF Jul16 21 calls for $1.61.  Looking for a double in this call to close.

I sold three Taiwan Semiconductor (Ticker: TSM) June 18 120-strike calls at $2.31 on Friday, just because I am running out of time and the position was about even with the QQQ puts. The crazy thing is, of course, that TSM looks crazy strong, so I bought two TSM July 21 125-strike calls for $2.51. Targeting a double on those calls and I still own the June 18 100-strike put too. 

Palantir (Ticker: PLTR) stock is trading over $24. Since the net position was up around 8%, I sold the stock and moved into cheaper calls. I bought five PLTR July 18 26-strike calls for $1.18

Below is the current status and track record of the Power Moves Portfolio …



Volatility Edge/Volatility Trading Club:

The Option Pit VIX Light is still red, and the Cboe S&P 500 9-Day Volatility Index (VIX9D) made COVID-era lows. I am still learning short VIX delta here.

 

Mark created three put trades short, medium and long term for UVXY on Tuesday and so far so good. UVXY closed at a pandemic low on Friday.

 

I was able to close VIX June 16 20-strike puts at $2.80, which gives me trade No. 246 for 7% credit with upside until June 16.

 

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

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