VIX is a bit worried about the QQQ
$QQQ had another down day today as the selloff in the big tech names is still moving with decent force. The old days of 180+ $QQQ are in the review window at least until $AAPL reports this week. I think that is where the vol is living now. $AAPL can push us to 170 or 180 easily after the number so the VIX Aug future near 15 is pricing the swing to 1% in SPX.
Note how the $VIX future curve compressed a bit from last week but did not absorb all the VIX cash move. 2018 has been a year of flat and backward curves mostly because VIX cash would go nuts and the futures discounted that. Right now there is not much of a discount. That brings us back to the type of trade around AAPL earnings.
Charts from VIX Central
There is plenty of juice in GOOGL, $FB, AMZN and TWTR. We are seeing premium we don’t normally see after earnings because Tech Wreck 2018 picked up another leg today. There have been several earnings for AAPL in the past that are “big earnings”. By that I mean the market followers are looking to AAPL for some broader momentum. That is where the interesting opportunity lies.
One could sell some OTM put spreads in the bigger tech names, say 6 to 8 weeks out, and buy shorter dated QQQ puts in case the VIX futures pricing turns out to be correct. The second trade would be more direct put buys in VIX around the Aug expiration with some moderate hedging. What this would set up is a pretty sweet long gamma and long theta trade position using VIX as the inner long gamma and QQQ/Short Tech Put Spreads reads as a potential short premium generator. We will set this up for our Vol Newsletter tomorrow or Mark will look in the Chat Room.
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Disclosure: Positions in GOOGL, QQQ, VIX, SPX
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