Yo Pit Crazies,
Jerome Powell grabbed the mic yesterday and was all like, I will raise rates .50 basis points, if I need to.
And just when the small rally the market had going after a huge week was all set to go away and commence an ugly selloff …
The market rallied back to near unchanged, with the VIX down.
Meanwhile, bonds tanked.
Will nothing stop the volatility destruction going on since last week?
Let’s find a target.
Knowing the Realized Volatility in SPX Helps With a VIX target
VIX is the 30-day implied volatility of the S&P 500 (SPX). That is not today’s volatility or tomorrow’s volatility, but rather a continual time for market movement.
Note below the 10-day realized vol is 28.83%. Vol Man is noticing a 23.53 VIX is discounting the recent activity heavily. That means the market is too and traders are not expecting the extreme moves of the last two weeks.
SPX close for IV and HV (historical/realized volatility).
I think a better target is the 60-day realized vol (21.10).
Why?
Inflation, Russians, rate hikes and oil squeeze have happened …
And much of the realized vol this year was the potential for those things to happen, which they did.
Things could still go horribly wrong, but for now, lower VIX is lower VIX. And, in fact, I still like my 20 VIX target for this week.
There is nothing wrong with taking profits along the way like I did in VTC Trade 285 (read to the end for that).
Gotta close them sometime!
The Rundown
Capitol Gains w/ Frank Gregory
Option Pit DC and Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.
My Exxon Mobil Corp (Ticker: XOM) call calendars from last week are running up 20% and the Canejo Corp (Ticker: CCJ) strangles closed up 27%
Power Income Trader:
Power Income Trader is a systematic approach to trading inflation. By pulling real-time data from the Fed, US Treasury and Gov’t, Power Income Trader alerts users on changes in money flow driven by Fed policy. Bill’s system puts you out in front of the most powerful money flow in the world.
Griff added to his impressive record with a 110% gain in some Purefunds ISE Junior Silver Miners ETF (Ticker: SILJ) call spreads.
Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session.
The Pro Room was a bit quiet on Monday, with very little market action to trade off. Long-term bonds were getting hit pretty hard. But Cat found a way to make some bucks … so we can call this “The day of the Kitty!”
Nitro Trader:
Option Pit CEO Mark Sebastian uses butterfly and spread strategy for trades that can profit in either direction.
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Mark rang the CCJ butterflies for a 70% gain and MSCI Brazil Funds ETF (Ticker: EWZ) call diagonals for 42% on a partial close.
Trading Legion:
The Trading Legion is a “next step” trading education program. The goal is to teach students the best times to buy options.
I am working short puts, just down slightly, in the June cycle in PetroBras SA (Ticker: PBR), but these should yield 7% or PBR at $11.
Volatility Edge & Volatility Trading Club:
The Option Pit VIX Light Is Yellow.
VTC Trade No. 285 VIX Apr/May curve trade closed for a 15% gain on risk dollars with very little directional market risk.
Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!
To Your Trading Success,
AG