In our weekend advisory letters, we said:
“With the elevated volatility levels in the market (IVR of the VIX is still at 99%), this favors shorting overpriced options (with the charts as always) and/or trades with positive time decay. This should be an incredible week for selling puts/spreads – particularly if we get one more wash out to the downside in the already oversold broader markets.”
Although the put premiums have substantially contracted in the SPY with its robust rally off the r200-MA, the IVR of the VIX is still at 98% with the ETFs still elevated/overbought on the charts.
This favors shorting these overpriced call options on Volatility ETFs, Options, and Futures. We prefer using VXX and UVXY.
Below is a daily chart of VXX:
We want to get into a short-term OTM bear call credit spread in VXX (4 DTE) with the intent to roll if SPY sells off and VXX happens to expire ITM (appears unlikely at this point). We will issue our recommended entry this morning via text message.
Greg Capra has been discussing an ideal scenario with the broader market indices again retesting prior lows – and preferably making new lows deeper into monthly support which will get market internals more in alignment for a longer-term bounce.
If that occurs, once we get a bullish reversal in SPY (we will be monitoring closely on multiple time frames), we will again be issuing MANY trades on selling overpriced put spreads on stocks and index ETFs – plus issuing MANY trades on selling overpriced call spreads on Volatility ETFs, with multiple strikes and expiration dates.
Stay tuned!
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Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director of Master Trader
Pristine’s Founder and Creator of the Pristine Method
Dan Gibby
Chief Options Strategist
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NOTE: Master Trader will show opening and closing prices of all stock and option trades. We do not recommend proper share size for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk.
NOTE: Master Trader and its representatives might have existing positions in these and other trade recommendations before or after suggested herein. Additionally, we often manage them differently for internal purposes based on different risk parameters than noted herein.
