Yo Pit Crazies,
I stole that subject line. Well, I paraphrased it … from Mark Sebestian.
No, not the Mark Sebastian … Little Mark Sebastian, his son.
In a semi-famous Facebook post, Little Mark bemoans the Chicago Bears not making it happen for the umpteenth time. In his young life, Da Bears are once again messing up a game.
It’s a tragic and funny video at the same time.
That got me thinking about the S&P 500 (Ticker: SPX).
When will it be good again?
Because this is tragic and funny at the same time.
Where Have All the Good Times Gone?
The Option Pit VIX Light is yellow, and Mark Sebastian (our Mark Sebastian, this time!) is about to flip it to green.
Here we have a chart of the iPath Series B S&P 500 short term VIX futures ETN (Ticker: VXX):
The three-week chart says VXX isn’t making new lows, although it tried to on Tuesday morning but was rejected.
Without the VIX futures (which VXX tracks) making new lows, or at least matching old lows, it’s hard for the SPX to rally and hit new highs. And the VIX Light stays yellow.
I will get excited about a rally in SPX when VXX drops below 36 this week.
In short, right now it’s looking like it won’t “be good again” any time soon, at least for traders long in the SPX.
THE LESSON: VIX futures are a great tell for whether or not traders really believe a rally will hold. And the VXX can be a helpful indicator because it tracks the front two month VIX futures, which are typically the most active.
For an intro to VXX, check out our video here.
The Rundown
Sharp Bets:
Mark Sebastian runs our marquee long option strategy for a once per week trade. SB specializes in low implied volatility calls and puts, and managing trade size for a risk-adjusted options portfolio.
Mark added a buy of Advanced Micro Devices (Ticker: AMD) Jun18 77.5 calls for $2.05. Implied volatility is at year lows in that name, so the options are very inexpensive.
SB closed the Nordstrom Inc (Ticker: JWN) May21 40 calls for a 19% gain this week. Viacom Class A (Ticker: VIAC) calls have an outside shot, and are moving back to even.
Pro Trading Room:
This 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.
Note my selections here are bearish, except for Hecla Mining Trade (Ticker: HL) which is bullish gold. The long commodity consensus in the Pro Chat Room is still there.
-
-
- Buy to open Ark ETF Tri/Innovation fund (Ticker: ARKK) Jun18 96.96/85/65 puts for $1.45.
- Buy to open Hecla Mining Co. (Ticker: HL) Jun18 9 calls for $0.54.
- Buy to open Tesla Inc (Ticker: TSLA) May21 570/520/475 puts for $9.16 (This is Cat’s idea, I highlighted her in my ProProfile yesterday.)
-
And if you have questions, or would like to learn more, give our customer care team a call at (888) 872-3301 Monday-Friday between 9 a.m.-5 p.m. EST. Or reach them by email at support@optionpithp.local.
Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.
-
-
- The Invesco CurrencyShares Euro Trust ETF (TIcker: FXE) is moving higher and the trade is back to even. With the dollar doing a redux of 2009, when the US government had its last big spending binge, the Euro went north in a hurry, per Bill Griffo.
-
The Power Income Portfolio:
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.
Here is the full rundown:
TPI Composites (Ticker: TPIC) has been near impossible to fill in the Aug cycle, as the stock ran from the early drop this week. (Sadness …) I did end up buying 4 TPIC Jun18 50 calls for $1.00, but the stock is too illiquid really to execute anything of size, or farther durations. I am only doing half of my normal allocation of $1,000 in risk per trade. I have it on my radar in case I see a big pullback, and am working a $1.50 offer to sell half of my calls. I have my eye on selling TPIC Dec17 35 puts for a yield play if I can get them up to 15% return or better.
General Electric Company (Ticker: GE) is a play on green energy. I own the GE Jun04 14 calls, and am short the GE Jun04 13/10 put spreads for $0.16 credit. I closed the short puts today, and own the calls for a small credit, mostly because GE is not moving from the strike. I have closed the short put spread for a 10% return on risk, and if the calls move we’ll have a big win. If not, I will just keep a small credit.
Vale S.A. (Ticker: VALE) is just treading water, with the position down a bit in the long 5 VALE Jun18 22 calls and 20 puts I own for $1.60. The big move in commodity prices is still rolling and I am looking for my calls to get back to even with options still relatively cheap.
I own four Taiwan Semiconductor Inc (Ticker: TSM) Jun18 120 calls for $3.10, and 1 TSM Jun18 100 puts for $1.95. I have taken in $470 of gains against them via TSM calls I sold, and the QQQ put spreads I closed. The stock is so volatile it might have a hard time getting back to even on the calls. What this means is that TSM is orbiting in a fixed range, but not breaking out for my calls to become profitable. Anyone looking to piggyback this trade should watch for a dip as low as $108 on TSM as a potential entry point.
I executed my plan for Palantir Technologies Inc (Ticker: PLTR), but I feel it is too busy, and I just want to let the stock run because I would like to make this a longer term hold. I closed the 1 x 2 call spread for $0.06 debit today, as PLTR has gone straight up but the 1 x 2 call spread didn’t move. I own the 200 PLTR shares for an average price of $21.65, and 4 PLTR Jun18 17 puts. I will write some calls if the stock rallies, but for now I’m just sitting on it.
The Power Moves Portfolio Starting Lineup
Here are the current open positions …
Volatility Edge/Volatility Trading Club:
The Option Pit VIX Light is still yellow and Mark will flip to red if we have a quiet weekend and Monday opening.
VTC Trade No. 246 is my only live position right now.
-
-
- I own the VIX Jun16 30/45/60 call butterflies and Jun16 20 puts. I paid $2.15 for the trade, and the VIX Jun16 20 puts were trading at $1.50 on the close, so I sold some puts at $1.60 for a 33% gain Friday.
- The position can turn long VIX delta very fast since the ratio is now 5 call flies to 3 VIX puts.
- Trades No. 243 and 242 expire today with a $184 and $45 loss respectively. That’s $1160 in gains on the cycle versus $229 in losses. That’s a pace I would like to continue. Not bad for a market neutral strategy!
- I own the VIX Jun16 30/45/60 call butterflies and Jun16 20 puts. I paid $2.15 for the trade, and the VIX Jun16 20 puts were trading at $1.50 on the close, so I sold some puts at $1.60 for a 33% gain Friday.
-
Remember, a lot of vol strategies I use are market neutral. That means if 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!
Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Radar to find order flow in active names.
-
-
- Mark opened an American Airlines (Ticker: AAL) Jun18 24 call on a COVID bounce. Frank Gregory likes airlines as well, as he sees big numbers flying again.
-
Like what you're seeing? Have more questions? Drop a comment below!
To Your Trading Success,
AG