🚗UVIX Bears Its Teeth

[] [The daily rundown of everything happening at Option Pit.]( [.]( MARK-et Open Hey OP Crew, AG’s alter-ego Vol Man here with my weekly analysis. As usual, I will start with last week’s forecast… Last Week: The good employment report was overshadowed by the weekend. For most of Friday, stocks gained and bonds sold which is pre-QE norm – and the market welcomed it. VIX and SPX will be controlled by the Middle East news this week, so generally I can imagine a 20+ handle and lows for the week would be lucky to reach 16 if hostilities get under control. Well, the range for VIX this week was low 15s to 20.50. Not a bad look from me as most of the week stocks held until everyone freaked out about the pending Israeli invasion and Hamas threats across the globe. Only a 20 VIX to close mid-19 seems like a miracle. We closed the week with the Middle East taking over the market narrative. What I will tell you is that trading in war time is a bit different. Liquidity goes to 0. If you ever made a market in options or stocks (which I did for 15 years) you learn the markets are like a Jell-O mold. It’s there, but if you start pushing it, your fingers go right through it. That’s what happened Friday, even with good earnings from JPMorgan Chase (Ticker: JPM). SPX started the day in green only to finish down 1.25% from the top tick Friday morning. [ SPX daily price action over the last 30 days [ SPX sigma levels over the last 30 days. Sigmas did not hold highs as traders took the jump in VIX and SPX vol to sell juice into the close. Short term IVs only got as high as last week but SPX was 4200 not 4325 so on balance a massive jump in IV with very little selloff in stocks. 10-day realized vol is 12.00% in SPX but intraday vols are running close to 16% + as stocks make moves lower most days and then bounce to recover. VIX is running hot on the headline news and not really the close to close vol as VIX has a hard time holding a bid. We did close in Zone 3 so that is a setup to short vol on Monday. [ Hard to believe VIX cash closed unchanged from Monday or only .26, see below. This time, there was much more response out of VIX futures as forward vol picked up big time. For now traders are letting the whole curve lift instead of backwardation. That’s usually a sign of sustained vol as they price in the conflict in the Middle East going longer. [ Pre open VIX curve, Oct 09 2023 [ Closing VIX curve, Oct 13, 2023 VIX jumped to levels not seen since we crossed 4200 two weeks ago. SPX is still a full 100+ points higher, so traders aren’t ready to sell stuck unless there’s a fiasco. [ VIX 30 day chart with 1 min candles VIX was 16 yesterday and UVIX just split at $29. VIX ripping to $20 today pushes UVIX up to $40, so the product is doing what it’s supposed to do. My guess is Israel goes into Gaza, and VIX does come off next week with the Hamas threat not panning out. Usually when the tanks roll, vol comes in. I think 16s are still easy to get to next week but the upside is 30 if things get horrible this weekend. It’s a rough story for sure. Let’s Go! [/campaigns/org775804783/sitesapi/files/images/774695510/ag (2).png] Pit Report: Energy Looking Hot Lately Time to put your volatility hat on and take a dance with Devon Energy Inc (Ticker: DVN). I think DVN is a good bargain based on cash flow, etc. but that has not stopped the market from smoking it lower this year. DVN was $64 and just $55 in early Sep. From there everyone hit the bricks on anything related to energy until this weekend when the Mideast turmoil reminded everyone again how sticky things are. [ 1 year chart of DVN with 90 day IVs [We have some higher IVs, so let’s go hunting.]( - AG Profits In Pumps: Your New Favorite Class We all have our favorite class or teacher that we will always remember. Mrs. Meisner in fourth grade constantly reminded us to sit up straight, which was a great thing that has stuck with me all these years. I had a History teacher in high school that wrote me a poem at the end of the year. That was kinda weird. My options trading mentor, Ernie Naiditch–wonderful man, was a great teacher. Although his son was better. He gathered all us clerks everyday after the close to teach us how to price options. By the time I finished his course I could correctly guess the market, on most any option, given the stock price, strike price, expiration and implied volatility. And of course the pricing of the calendar spreads, which is much easier, and you should know why. Option Pit is holding its own Special Class, soon to be your favorite, on Saturday October 21st from 9:30-11:30 AM ET. Mark Sebastian and Andrew Giovinazzi will be teaching a lucky 200 traders all about their proprietary options scanner. The actual scanner created just for Option Pit and used by Mark and Andrew to find those most profitable options to buy. Basically once you have your stock and direction the scanner will tell you exactly what to buy. What is the best option to buy today on AAPL with $500? … with $1000? Mark and Andrew are even going to send you materials ahead of time to prepare for your next favorite class. By the end of your next favorite class you will be able to: - Evaluate HOW GOOD your trade is BEFORE placing it - Know HOW LONG to stay in trades - Understand how much options DECAY before they move - Find options with the EASIEST chance to pay based on market conditions - And you’ll be able to do it all on ANY ticker How awesome is that?? [Remember, they are only allowing 200 student traders so sign up now.]( You do not want to miss this CLASS! [I also have a new trade idea for you.]( - Licia OPTION PIT GLOSSARY [( There are plenty of terms in the trading world that need defining. The [Option Pit Glossary]( is here to help. Today's phrase is: Earnings: A company’s quarterly (usually) financial report, which can often act as a volatility catalyst for the underlying stock. [( DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. 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