The ES (S&P 500 Futures), almost rallied above 1100 today, yet failed again to break through. I am not a technician by any means but this is certainly something to watch. The SPX got to just under 1100, with the VIX down over 2 bucks and the VXX down as much as 1.40. Then the market began to give back some of its gains.
The VXX which represents something that actually DOES have a pattern seems to be on some sort of bottom here. I have been bearish volatility for a long time and rightly so. In an exercise today during the Afternoon Pit Report I showed how a SPY Condor was a better sale one month ago, and how the SPY butterfly was a worse sale on month ago. The falling VXX means the not only is IV coming in, but skew is flattening too. This is something that any trader needs to understand. It also explains why I made my official reversal on butterflies over the last week. One thing to note, with a flat skew, there is 0 reason not to cover the delta on a butterfly, it costs less and is also less likely to hit the accordion crunch as the underlying runs up.
Now that the market has hit the 1100 I think we sell off, we may get another push form MSFT tonight (although I doubt it). Rather than put on some bear spread on the SPX, I thought it would be fun to enter some sort of bullish spread in the VXX. I have a few ideas in mind as to the trade I might enter which I will do tomorrow (assuming the market does not drop out from under me).
However, rather than me picking the trade, I would love a few ideas from you readers. Send me a bearish trade in the VXX. The top two trades will be entered (separately). We will follow them on the blog. The two traders will receive all sorts of kudos from me and the winners will each receive a one year subscription to Expiring Monthly: The Option Traders Journal. Entries will be judged on uniqueness, profitability, and of course, which ones I like the best. Have at it traders
Get those entries in by tomorrow at 3:45 EDT Tomorrow! Email them to me Mark@option911.com.
