Yo Pit Crazies,

Here’s what the VIX  looks like this week …

A big jump after the bucket of cold water from Sheriff Jerome Powell of the Jackson Hole Fed Posse.

He told traders again that rates are going up. Another Fed Governor said the same yesterday.

Bottom line: Rates are going up until inflation comes down.

Now, a big part of inflation is currently self-inflicted. Government spending and mandates, Russian sanctions and Green Energy squeezes are causing all kinds of problems.

This might be the first self-inflicted gunshot wound ever for the G7!

Stocks are still going down, but VIX is not really going up anymore.

Why is that?

The Velocity of SPX Moves Is Not Speeding Up

For the S&P 500, 2022 has not been a year of crazy moves.

VIX got to 100 in 2020, but nowhere near that this year.

The short answer is traders think things will just get a bit worse – not go to zero.

That is a big difference in how pros reach for puts.  

A trader does not buy 2500 puts in SPX if they don’t think we are dropping another 500 points. That is why VIX drifts back to 20.

The uncertainty over the potential recession is enough to cloud the future, but not enough for total calamity.

As a reminder, the tech heavy Invesco QQQ Trust Series 1 (Ticker: QQQ) is down 25% from its crazy high in 2021 already.

Broad indexes were down 38% in the global financial crisis 14 years ago. (Yes, the GFC was 14 years ago!)

That is why 20 VIX will be a floor for any real down move until the Fed stops tightening. That was the low end for VIX before the Fed changed posture, so it is the most recent low. Call it 19.5.

The SPYMaster strategy buys SPY puts right now and gets VIX puts to pay if we hit 20.

If you want in on this HUGE profit opportunity, join us while you still can.

The Rundown

Power Income Trader

Bill comes back from vacation and kills early with a SPDR Financial Select ETF (Ticker: XLF) Sept. 16 34 puts & Aug. 19 34 puts closed for a 185% gain.

To Your Trading Success,

AG