Yo, Pit Crazies,

A little something to be on the lookout for …

I will put out my best trade ideas for 2023 this week.

It will be time to look for new blood. Hot sectors come and go – remember Big Tech in 2020 and 2021? All down big from their highs.  

Some things are constant, though. Like reverting vol movements. The big question is if VIX can stay locked in Zone 3 (18-23) for the year like it did in 2022. I would say that is tough, but the markets can stay volatile longer than you think.

10-day VIX with one-minute candles

After a brief run on Thursday, VIX came right back down to earth but is still hanging out below the longer term realized volatility trends in 2022.

What will that mean for 2023?

Gravitational Pull in VIX Is FADING Short Term

The big graphic below says 30-day realized vol is now below 20, with longer term 60 day realized vol closer to 25. 

Those are market conditions, just like the weather.

And also just like the weather, there is very little a trader can do to change conditions – however, we can choose how we respond to them.

There could be some seasonality to the drop in realized vol in SPX, but I doubt it.

Markets are thin, somewhat illiquid, and the only thing I can touch on is that the Fed has signaled an apex in rate hikes and inflation is cooling somewhat. Those two issues drove a lot of the volatility in 2022 and are now less uncertain, which means VIX would have a hard time staying at the relatively higher average of 2022. The 200-day moving average for VIX this year was 25.66 and I don’t think we best that in 2023

If we are entering a lower volatility condition, there are trades for that. My new Easy Button delivers the best trades based on the vol conditions I see …

SPY Master trades the VIX conditions and the SPDR S&P 500 Trust (Ticker: SPY) direction …

Option Pit Pro teaches students how to trade in all conditions. Take a peek on Wednesday.

To Your Trading Success,

AG