This last pullback was really as typical as they come. We had a geopolitical event that caused the VIX to jump significantly. And what happened next, is that everyone started calling for a big 10-20% correction. Then, cooler heads prevailed, and institutions came roaring back and bought this market head over heals. Over the last few years, there has not been one geopolitical event that has caused a correction of more than 5%. In addition, the technical picture was so clear. We had an overbought reading on the RSI, and the pullback alleviated that. We went from a 70 RSI on the SPY to a 30 RSI. But, what is really making this past pullback so typical?
All posts by Max Ganik
Trade Update: Closed Out $VXX Short For a Profit
A couple of weeks ago, I gave a trade update on my short VXX trade. My trade was to short the VXX calls in anticipation that geopolitical fear would recede and that the market would bounce back. I was correct; since my trade, the VIX/VXX has tanked and the market is back in rally mode. I closed out the short calls for a 65% gain. I hope that this trade shows you a couple things.
Playing for a rally in $GOOGL
This morning I bought calls in $GOOGL. I have the weekly $585 calls and the September $580 calls. I think GOOGL makes its way back up to $600 and then tests the post-earnings high of $615. We had a nice pullback and I think we are going to breakout above $580 in the coming days. There is a lot of paper in the September options, specifically the $575 calls. Today alone (at the time of this writing) there is over $1.5 million in calls bought.
Charts of the Day $AAPL $SPY $NYMO $IWM
SPY:
In my opinion the SPY has made a bottom. I think that the recent sell-off was purely geo-political which means that the SPY is going to go back to the 50dma. I do not see much more action for the spy. I think we will go back to the days were we only see .25% intra day ranges. I think that this is the case at least until the next big market catalyst, whether it is positive/negative geo-political news (such as Russia taking troops off the boarder or actually invading Ukraine) or comments made by the Fed remains to be seen.
Trade Update: Shorting VXX Calls
A few weeks ago, I wrote about a strategy that consisted of selling short out-of-the-money VXX calls. Before I was willing to short the calls, I wanted the IV on the VXX to be near all time highs and I also wanted there to be a pullback in the SPY. Both of those occurred today, therefore, I shorted the September $50 VXX calls. In this blog post, I will explain why I like this trade so much and how this strategy is much better than any other bullish strategy.