VIX Up, QQQ Down – Now What?

Andrew Giovinazzi

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Yo Pit Crazies,

I warned over the weekend that the Invesco QQQ Trust (Ticker: QQQ) was a bit shaky.

It looked like enough to dampen the upside and keep the VIX from going off the rails this week.

Well, I was wrong – sort of.

QQQ stayed ugly … but it started to spread for various reasons:

Inflation numbers this week
Shanghai: About 100 million people locked in their houses in China
Supply chain woes
Interest rates to the moon with 30-year mortgages up to 5%

None of this is good for stocks in the short term as the Biden administration gets rocked by multiple issues at once.

The difference now is, the Fed can’t help.

What to do?

QQQ Volatility Is Closer to 30%

In the words of Tony Montana in Scarface, “Say hello to my little friend.”

The Cboe NASDAQ Volatility Index (Ticker: VXN) uses the same calc as VIX but on the Nasdaq-100 index.

Right now, after enjoying a 30% trough-to-peak in 2021, QQQ (which tracks the Nasdaq-100) is off to a rough start.

The chart below is the on-emonth VXN with on-eday candles with a very solid five days as the QQQ selloff is picking up.

I don/t see any relief until the CPI numbers this morning – when things will most likely get worse. Consumer inflation is projected to be 8.4%, the worst since December 1981.

The easiest trade is cheap downside put flies, and I will try and add one for the Trading Legion before I split for Easter vacation Thursday.

Another nice product is ProShares UltraPro Short QQQ ETF (Ticker: SQQQ). Buying upside call butterflies there is betting on a decline in QQQ. We still have a few left from my Vol Trade Club idea from a few weeks ago and they are starting to perk up.

The Rundown

Nitro Trader

Mark poured some Nitro on some iShares Brazil ETF (Ticker: EWZ) diagonal calendar spreads and Ark Funds Ark Innovation ETF (Ticker: ARKK) put flies for a 66% gain.

Power Income Trader

Bill closed an iShares French ETF (Ticker: EWQ) put spread for a 40% gain on the Macron/Le Pen election worries.

And there is a TON of economic data out next week that Bill is ready to trade.

– Consumer Price Index on on Tuesday

– Producer Price Index on Wednesday

– Retail Sales and Consumer Sentiment on Thursday.

– Plus over $100 billion in new bond supply.

Griff is going live on Wednesday at 1 p.m. ET to show you how to profit in a bear market AND profit again when it bounces back.

Option Shopper

Licia is running hot after vacation with Walmart Inc (Ticker: WMT) put spreads up 50% already!

The shopping spree continues – join Licia now!

Volatility Edge & Volatility Trading Club: