Yo Pit Crazies,

Once again, the broad market was very weak yesterday. 

Even Nvidia Corp (Ticker: NVDA) and Advanced Micro Devices Corp (Ticker: AMD) had a red day. 

The most surprising red day was in the VIX futures. SPX, the Invesco QQQ Trust (Ticker: QQQ), and the iPath S&P 500 VIX Short Term Futures ETN (Ticker: VXX) were all red.

VXX is very close to an all-time low. That does not make sense.

VIX futures markets, closing prices, May 31, 2023

Is the market discounting a debt ceiling deal and 25% gains in QQQ right now?

Let’s find out.

VXX Owns VIX Futures, Not The VIX

Below is the 3 month chart of VXX. As you can see, it did not have a very good year. 

It was looking good in early March when the banking crisis got into full swing, but since then VIX futures have been on a steady downward trend.

VXX is what we call a Vol Product at Option Pit, mostly traded in Easy Button and Trading Desk.

Basically, these are products that own or short VIX futures in some form. They create unique training opportunities. 

It was hard to believe that on a down day with debt ceiling votes still waiting, VIX futures could not find a bid. Not bullish VIX, even with VIX up on the day. The nutty thing is that VIX and VIX futures can move in different directions.

That is something you can learn how to trade in OP Mentoring.

VXX 3-month chart

Most long volatility future products are near year lows. That could change on a surprise out of DC but i think this week has two ways to go:

1. SPX 4000 or lower if Congress messes up the debt deal
2. VIX 16 or lower if they get it right

Sometimes the market gives a strong signal, and I’m taking the latter outcome right now.

The Rundown

Option Shopper

SPX Mini Index (Ticker: XSP) May25 216 calls closed for a 65% gain

Power Income Trader

SPDR S&P 500 Trust (Ticker: SPY) 2/6/4 Jun02 419/412/405 put butterfly closed for a 219% gain

To Your Trading Success,

AG