First thing Wednesday morning I told you that the SPX Jan 20 straddle was too cheap ahead of Joe Biden’s inauguration.
The straddle had closed Tuesday at $27.
If someone was long that straddle, they had a pretty nice day, raking in a one-day return of 100%.
While I did not have that particular straddle on, I still made money … and in only a few minutes.
Money in Moments
As I said I would in yesterday’s VIX Edge, I bought calls near the open in the direction of Wednesday’s move.
My trade was the SPX Jan20 2830 calls …
- I paid $6.80 at 9:50 AM ET.
- I sold them at $8.10 at 10:05 ET.
- I made $1.30 per contract ($130.00) — almost a 20% return in 15 minutes.
I then bought the 3840’s for $6.0 and sold them at $7.50 — for $1.50 per contract win ($150).
That 25% gain took about five minutes.
Finally, I bought the 3850’s for $4.10 and sold them at $7.00 … a win of $2.90 per contract ($290.00).
A 71% return that took a few hours this time. So slow! (LOL)
Not bad for a “day’s” work …
Stick to the Plan … Again
I was successful yesterday because I traded my plan, which was built on the idea that volatility was too cheap based on how the S&P 500 was moving and the movement the options had priced in.
Now for the big question I know that’s on your mind: Is there still a trade out there that you can make today?
The answer is … yes!
Friday’s options appear to, yet again, be too cheap.
Friday’s straddle, which makes money as long as the S&P 500 moves (regardless of direction), is priced at just over 34 dollars:
This straddle has TWO full trading days to move 34 bucks.
We moved over 52 points yesterday alone.
Considering we are moving close to 30 points almost every day (nine of the last 12 trading days), I think these options are WAY too cheap.
Heading into today’s open, knowing options are cheap, I will absolutely approach trading with the exact same battle plan.
Once I see where the S&P 500 opens … I will again buy calls or puts in the direction of the move.
This time, though, I am not trading options with one day to expire … I’m getting to buy options with two full trading days in them!
Needless to say, I am licking my chops.
The VIX Light is Red, meaning the VIX is likely to drop in the next 30 days.
Your Only Option,
Mark Sebastian
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