When do I want to do more and double down?

BY ANDREW GIOVINAZZI

June 17, 2024

Yo Pit Crazies,

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My students know I like to trade volatility when I trade options. Well volatility and catalyst since options are more fun when the stocks are flying and the options are moving. This is for options buyers since options sellers don’t want too much action.

This is another reason trading volatility is so much fun. I can buy options but sell volatility. Kinda weird when you think about it. Also note below that VIX has a sticky habit of going back to 12.

1 year VIX chart

So when is the best time to do it?

Look for a white candle first

I need to see a day when VIX has already made a move up. The thing with volatility momentum on the downside is the balloon needs to fill with air first then ride the burst on the way down. Then I want to see a red candle for two day and the VIX curve make a meaningful change from backward to flat. VIX can stay in backwardation a long time so trying to fight that upward trend is futile.

That is when I get ready to add to a short position. Wait until the time is favorable.

To Your Trading Success,

-AG