BY ANDREW GIOVINAZZI
August 14, 2024
Yo Pit Crazies,
Mark and I will teach you how to master the Credit Spread trade. Except it is not the Credit Spread Trade it just acts like it for a fraction of the risk. Click here for Wednesday night at 8pm.
So I saw on Twitter this line, “I like to report a murder.” That murder is VIX. The market killed it. I am waiting for the stats guys on FinTwit to come out of the woodwork but right now this is the largest drop from a 50 or even a 40 VIX I can remember. That is a lot of red candles with the market just ignoring the drop to 5100.
7% down? Ha! Now folks are wondering when we get back to 5500. Just yesterday I thought 5400 for the week would be an accomplishment. Now I think we have an outside chance at 5500 for this week. For people that blew up last week, getting back to 5400 in a week must be a little annoying. That was a problem we did not have at Option Pit. We mostly avoid big credit trades.
We are riding VIX puts in Weekly Profit Cycles and I put some stops in but I think we have a real shot at sub-16 VIX this week.
30 Day VIX with 1 day candles
I will tell you why.
Traders are ignoring the 10 Day Realized Volatility
Ignoring is not the right word. Discounting hugely is the correct phrase. The 30 day implied volatility as shown in the red line below is collapsing before our eyes. 10 day volatility, which is the last 10 days, is what traders use for a short term volatility expectation. That number is getting discounted bigly.
30 day volatility in SPX was as low as 10.46% over the last month and is currently 15%. 30 Day IV is not exactly the same as VIX but they track 99.9%. IV30 measures a rolling average of 30 day options so it makes a good proxy. Either way, IV is collapsing and the only target I can see is around 12% for IV30. That is about a 15 VIX. That is a reasonable target at this rate if SPX keeps this steady climb back up.
To avoid the credit spread trap, check out Mark and I tonight here and make better income trades.
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
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