Dear Profit Takeover reader,
During yesterday’s live Profit Takeover show, Andrew Giovinazzi, Chief Options Strategist at The Option Pit LLC, joined me to chat about options, volatility, and the trades we are watching…
Andrew wrote the program which taught me how to trade. He’s an expert in options and volatility and we took a look at the market and VIX futures, noticing an unusual phenomenon.
Typically, the market and the VIX move in opposite directions, but this week, when the market fell, VIX did too.
This only happens when the market is expected to move down. There isn’t volatility when things are going as expected.
And we pulled up the VIX futures curve… which is currently in contango.
This is a signal that the market is looking for less volatility in the short-term.
As Andrew put it, this is one of the cleanest, low-vol signals you can get.
So what does lower volatility mean for trades?
For trading the overall market, you’d go short the market and short vol in a situation like what we are seeing.
If you are looking for something to go long, I’d recommend tangible things like, steel, cars, industrials, and the like.
Basically, anything except AAPL – because I think this one is still heading lower.
Even though I mentioned that AAPL typically moves with the market, it’s currently breaking that trend.
Something fascinating may happen… AAPL could drop to $125 and the market could rally through.
Until next time,
November 04 2022