Yo Pit Crazies,
Part of what I teach here at Option Pit is how to price a range.
Or, more specifically, how the market is pricing the range.
That is a skill to carry in all markets and in all names. Thirty years of trading went into my ability to do this … and now my students reap the benefits!
We just had a major pop in VIX.
That carried all the volatility products ,like the iPath Series B S&P 500 VIX Short Term Futures ETN (Ticker: VXX) to new recent highs.
It did not stay there and finished down 2.86% yesterday:
VXX moved as much in one week as it might be expected to move in a month.
St. Louis Fed President Jim Bullard fired a shot last week – but did not cause a crash (although SPX did get back to 4000).
So we’re back to where the Fed raises rates, just not as fast as last year.
Does that present what I like to call a “ranging” opportunity?
Let’s find out …
Volatility Trades Around An Expected Range
I thought volatility would be lower this week than last week.
Without Bullard, VIX would have been a lot lower. But J-Bull upset the apple cart.
Looking at the VXX chart below, Bullard’s comments changed the range expectation …
10 -day VXX with 1 min candles. VXX owns VIX futures.
The market responded dropping 150 SPX points last week into this week. VIX and VXX drop when the market expects a smaller range in SPX.
The Fed meeting minutes were released yesterday and they were dud. That should make the range drop for SPX, which should make VXX go down and VIX go down.
That is how I am positioned in SPYMaster, OP Mentoring and The Trade Desk.
Get all three of those as a special bundle when you call our Customer Care Team today at 1-888-872-3301 starting at 9 p.m. Current members of one or more services can apply credits to the others.
The Rundown
Nitro Trader
I closed the SPY Mar03 410/402/394 put butterfly closed for a 95% gain. Mark and I are running a long call fly Market Vectors Semiconductor ETF (Ticker: SMH), which should get a boost from Nvidia Corp (Ticker: NVDA).
Option Shopper
ProShares SPX Short ETF (Ticker: SPXU) Feb24 14.5 calls closed for a 33% gain.
To Your Trading Success,
AG