VIX Traffic Light: Green
Yesterday, I told you that the VIX curve briefly went backward… and my yellow light was on the brink of turning green.
Well, that’s exactly what happened as the market lost hundreds of points.
We’ve rarely had a green VIX light since I first started writing Profit Takeover. So, what does this mean?
When the light is green, we tend to believe that volatility will go higher, and the S&P will go lower. That’s what happened yesterday, and very well what could happen today.
But no matter whether the market heads up or down, a green VIX light will 100% deliver some wild moves. So be on guard…
And remember – high volatility means stocks are moving. And when stocks move, the opportunity to make money grows.
To learn more about what the different colors of my VIX light mean, check out my free report, The VIX: My Biggest Moneymaker is 20 Years of Trading.
Today’s Impact Money Trade
Big money was flowing in yesterday’s sell-off, and not one, but two big trades caught my eye.
First up, let’s talk about this 19,000 contract put sale in Morgan Stanley (NYSE:MS):
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Clearly, as the market was blowing lower, traders were selling puts in MS, collecting $1.30 on the October $90 puts.
We’re looking at a clear yield play here. This big money trader is looking to keep that $1.30 premium for the three-week hold time – and they will, provided MS doesn’t drop below $90 by expiration.
With this big a trade, we know that this trader feels pretty confident MS won’t go below the $90-level.
Now, MS is a familiar name – but every once in a while when I’m tracking big money flow, I discover a new name. And that’s exactly what just happened with Vistra Corp. (NYSE:VST).
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VST calls are going nuclear. We’re looking at a combo of call spreads and diagonals here, all looking for the company to move back above $18.
On average, this stock trades about 3,000 contracts a day. Yesterday, it did 66,000.
That’s a 2,100% increase in trading volume. And I’m leaning towards agreeing with this trader. VST has had an ugly drop over the last few days, but it looks like it wants to make a move higher from here…
The November $18 calls are relatively inexpensive for a nice piggyback trade. Or, you could buy the January $18-$22 call spread for about $0.85.
I’ve got three stocks and three trade ideas from the Watchlist today. It’s time to make back the money that the market may have taken from you yesterday.
- US Steel Corp. (NYSE:X)
Volatility soared in X the past couple of days, and the stock got smoked:
This drop made for a trade opportunity too juicy to ignore. I looked to sell the January $20 puts, taking in a $2.00 premium. If X falls below $18, I’d be happy to take delivery, adding this name to my portfolio.
- Ford Motor Co. (NYSE:F)
F has been an attractive name for months now. Before yesterday’s sell-off, options were pretty inexpensive – which is why we added a $0.60 option to the Profit Revolution portfolio.
Today, post-sell-off, that trade isn’t performing exactly how we wanted it to. I’m being honest here – that F trade is at a loss.
But we put a 50% stop-loss on every Profit Revolution trade. So we’ll never lose more than that on a single trade. And with a $1-or-less entry requirement, that means you’ll never lose more than half of what you put in – making every trade low-risk with a high potential reward.
Regardless of this losing trade, I’m still bullish on F. And options are still cheap. Today, I’m watching the November $13 calls for $0.82.
On Friday, F was right near $13. So it’s not a long shot to see these calls end up in-the-money (ITM).
- Freeport-McMoRan Inc. (NYSE:FCX)
FCX got toasted over the last few days…
But I think the mining company could bounce back quickly. Volatility is high, but it’s not insane. The October $33 calls, in fact, are only going for about $1.
If this thing gets ahead of steam, that option will double fast. Three days ago, FCX was above $37, so it’s not a far cry to see it get there again.
That’s all for today, but stay tuned…
This week’s live Profit Takeover session will feature a very special guest. And if you liked the cheap option trade ideas I gave you today on X, F, FCX, and VST, then get ready…
I can’t wait to show you what I’ve been working on.
Stay tuned for more details…
One response to “The VIX Light Is Green – Prepare Your Portfolio Now”
September 21 2021