This is the thing that is least likely to happen.

BY ANDREW GIOVINAZZI

January 31, 2025

Yo Pit Crazies,

I should preface this by saying what is the most likely thing to happen first. If you join Licia, you will learn to manage an option trading account. #2 is the market is expecting a lot of action every day.

A 16 VIX is traders expenting the ATM IV in SPX to be 16% or a 1% per day move. If I think about it, the market is expecting and pricing SPX to move over 60 points per day at least close to close. For perspective, when I was an SPX market maker, 16% VIX was a $6 move in SPX. And VIX was not invented yet. Ah the good ole days.

So I am somewhat familiar with how SPX moves. And right now SPX traders are expecting quite a bit.

SPX 20 Day realized volatility

The blue line is 20 day realized volatility and it is about as high as it has been over the last 6 months. And it has been a wild 6 months.

What they don’t expect:

Traders do not expect the market to slow down

An old trader adage, “trade for what you see, hedge for what you don’t” works pretty well. If you want to make really big dough of course, trade what others do not see and sell it when they do is the corollary.

I did cover a “short realized volatility” in my Pro Class today. Normally retail traders use an

Iron Condor but when the market moves too much, the Iron Condor gets smoked. My version of the trade won’t have that problem and it is theta positive meaning it should decay for a time in my favor.

Realized volatility should drop because-

The Inauguration is over

FOMC is over

NVDA has peaked

Most major earnings are out and for the most part they are good

The big question is when the realized vol drops. Today would be a good day to start. If you want to learn tricks about options from someone who has traded for 30 years, try here.

To Your Trading Success,