BY ANDREW GIOVINAZZI

August 13, 2023

Yo Pit Crazies,

Mark and I have been whooping it in the Trading Desk lately buying strangles.

Why are we buying strangles in the S&P 500 Mini Index (Ticker: XSP)? Because of this chart:  

VIX9D over the last 3 months

Note how the right side of the VIX 9 Day Index (Ticker: VIX9D) has made a big move from Zone 1 (9-13) that it has been happily chillin’.

VIX9D hopped out of Zone 1, never to see it again. The market is still nervous so let’s see how she closed.

Traders Slammed Vol into the Close

VIX9D closed in the 13 handle to 13.63. Now, some of this is the weekend effect, but traders held onto IV until the very last minutes:

VIX9D 5 day chart with 1 min candles

Note the progression of IV during the day. Since no selloff in SPX held, VIX9D kept sliding and did so into the close.

There was the hint of a change in sentiment as traders looked at Nvidia Corp (Ticker: NVDA) falling out of bed, but oil stocks holding up the market. That’s not enough to press down the SPX when one sector is going up and one is going down.

While the market still feels on edge, there was a little less edge into the close. That’s what a Zone for volatility change does.

On a positive note, the strangle I posted for the Easy Trade Button is a little green and ExxonMobil Corp (Ticker: XOM) is going rip rip up.

The Rundown

The Trading Desk

SPX Mini-Index (Ticker: XSP) Aug18 449 put/451 call strangle closed for a 15% gain (in 1 day)

To Your Trading Success,

AG