BY ANDREW GIOVINAZZI
December 18, 2023
Yo Pit Crazies,
There is still time to jump into Weekly Profit Cycles although that window is getting short.
On Friday, some traders decided to buy some VIX Jan17 17 calls. Over 180,000 of them traded on the strike and that was enough to move the VIX futures up for the 1st time in several weeks.
I even mentioned it in my Vol Man Vol Report in the Pit Stop today.
Traders buying VIX options is exactly why I designed Weekly Profit Cycles under the rubric of my Grandmother’s risk management mantra, “ You never know.” As good as the market looks now, even in healthy markets there are pullbacks, so some trader is setting up for a January surprise.
How can you tell the dealers were surprised?
Friday saw active VIX future buying
The biggest excitement on Friday was the dividend coming out of the SPDR S&P 500 Trust (Ticker: SPY) and some random Fed Governor pumping rates back up. The action in the IpATH Series B S&P 500 VIX short term futures ETN (Ticker: VXX) is telling. You see, VXX just owns VIX futures in the two near durations. If VIX futures are going up, VXX is going up. On Friday, when VXX was making a fresh low, the massive VIX call buying kicked in forcing traders to hedge the short call positions. They hedge by buying VIX futures.
AG
Andrew Giovinazzi
30-Year Trading Pro
See what's hot at option pit
CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain
The VIX future pop was good old supply and demand. Is the VIX call buyer right? Time will tell but my Weekly Profit Cycles strategy does not care because I am always holding market downside protections via VIX calls or SPY puts.
If this market gives you the jitters, take a look at what non-correlated market returns can do for your portfolio.
To Your Trading Success,