VIX Traffic Light
“It’s good to be watchful right now.”
That’s what Morgan Stanley’s CEO said on Thursday, warning that market volatility is going to swell as the Fed starts moving.
I agree that the VIX could move higher – but first, it’s got to move lower.
Despite an impending sell-off, my VIX light is red today.
Want to see why – and where volatility is headed in the coming days, weeks, months?
Last week, I introduced you to the SKEW index.
To recap, this is the cost of out-of-the-money (OTM) hedge puts relative to where at-the-money (ATM) puts are trading. And over the past two weeks, the cost of these OTM puts has been slowly bashed by hedgers.
We’re now in a position where the VIX could break 15. And if the market holds above its 50-day moving average (MA), it could drop to 14, 13, maybe even 12.
And that’s when it’s good to be “watchful,” in the words of James Gorman.
It sounds counterintuitive, I know. Volatility going down typically means the market is going up.
But the hedge trades have been saving the market from a major sell-off. And without them, we’re now set up for that sell-off to happen.
First, though, remember – the VIX needs to go down. And the volatility curve tells me that the VIX light is red this week:
With volatility heading down, I think we could see the S&P above 4,500 by Friday. We’re still several weeks off from that potential sell-off.
My Profit Revolution members had the chance to make a 200% profit in three trading days on one of these names.
1. CSX Corp. (Nasdaq:CSX)
I love rail, I love this chart, and I love CSX:
But you know what I really love? Owning the CSX January 21, 2022 $35 calls for $1.30.
See, coal is a product of CSX, and it’s in incredible demand right now. At $34, I think this stock is underpriced and could make a run at $40 soon.
2. Kroger Co. (NYSE:KR)
I’ve been bullish on this grocery chain for some time now, and I think we’re looking at a potential pop over $40 in KR. As a result, I like the November 19, 2021 $39 calls for only $0.84. These could double in short order, handing out a month-long 100% profit.
3. FuelCell Energy Inc. (Nasdaq:FCEL)
This industrial is flying higher, up 28% over the past five days – and 17% on the day as I type!
Last Wednesday, I recommended my Profit Revolution members get in on an FCEL call for only $0.39 – that’s a dirt-cheap $39 per contract.
On Friday, I recommended they sell half of that call position for $0.55 – that’s a two-day 41% profit.
Not bad – but you won’t believe what happened from there…
Because today, we were able to sell more of that position for $1.15.
That’s an almost 200% profit. Talk about an asymmetric trade!
I drop a new, LIVE trade recommendation every day the market’s open for my Profit Revolution members.
Learn how you can join – and get in on potential 200% winners like these – by giving us a call at 877.212.9163.
Today’s Impact Money Trade
We’ve got a doozy in DraftKings Inc. (Nasdaq:DKNG) today:
On the surface, this might look bearish – but because of the stock position, you can tell that it’s actually a hedge…
Making it a sneaky-bullish trade.
Frankly, I can’t believe DKNG is only $48 right now. It’s got a great business model, and I think it should be trading about 20% higher.
As a result, I’m more than happy to piggyback this trade.
I don’t want to construct a complicated collar to piggyback this DKNG trade. Instead, I’m looking at a simple, $3 long call trade:
The December 17, 2021 $50 calls will double with a nice lift in DKNG.
And that’s all for today, folks!
Founder, Profit Takeover
October 18 2021