BY ANDREW GIOVINAZZI 

August 10, 2023 

Yo Pit Crazies,

In last night’s presentation, I outlined my Core Market Setups for dealing with volatility. It’s the easiest way I know how to organize and parse any given day.

Pre-CPI the market showed a “skinny weak” condition. Maybe the CPI will change that.

VIX down and SPX down is not the stuff of trading movement. It smacks of something else.

Here are some opportunities I see going forward.

Vol Down and Stocks Down is Usually Overall Bearish SPX

SPX is in Setup 2 (VIX 13-18), and twice this last week, try as it might, it couldn’t break out and move to Setup 3 (VIX 19-23).

If anything, vol down SPX down is bearish realized vol. The stock market cannot get out of its own way, and options premiums cannot expand since SPX isn’t moving in a direction.

It is orbiting and in the last 4 months the straight up nature of SPX kept VIX higher because week to week stocks would be up 1-2% as SPX rallies 800 points in 4 months. Expanding directions keep premiums high.

In this case, options are priced high and SPX is not going anywhere. My Easy Trade Button looks for stocks going somewhere with low priced options.

Unless we have a crazy CPI number, I expect the SPX to close within 1% of Wednesday’s close.

The Rundown

Option Shopper

S&P Mini Index (Ticker: XSP) Aug9 449 puts closed for an 800% win (same-day expiration) 

Delta Trades

Medical Properties Trust (Ticker: MPW)  Sep01 10 puts closed for a 70% gain

Trading Desk

XSP Aug11 452 put/454 call strangle closed for a 42% gain (in 4 days)

XSP Aug 14 449 put/452 call strangle closed for a 14% gain (in 2 days) 

Power Income Trader

Raytheon Corp (Ticker: RTX) Sep22 87/88 call vertical spread closed for a 44% gain (in 1 day)

SPDR S&P 500 Trust ETF (Ticker: SPY) Aug18 445/444 put vertical spread closed for a 23% gain

To Your Trading Success,

AG