BY ANDREW GIOVINAZZI
March 28, 2024
Yo Pit Crazies,
Note the last 3 days in the SPDR S&P 500 Trust ETF (Ticker SPY). Those meltdowns and meltups are total madness after all day where stocks do nothing. Of course this plays well for ODTE because all the action happens toward the end of the day where the options decay down and then go BOOM!
3 day SPY chart
These end of day moves really make no sense except that they are happening. Somehow we got a $5 point peak to trough move between the close Tuesday and Wednesday. We trade all day in a 1 pt SPY range and then a trader hits the sell or buy button?
What to note is the difference in how things move. SPY has a range and I can trade a range.
So let’s check it out.
The Big End of Day moves are likely covering trades
I don’t care why underlyings move how they do. It is more important to see what I have to pay for the move I want to ride. ODTE is fun because small dollars become big dollars and these end of day moves can pay huge dollars.
Learning what to pay and why is where option volatility comes into play. Volatility is just how much a stock is expected to move over a period of time. Time plays a huge role. Next week’s options are pricing very low because of the holiday and these new closing moves look like a fund trying to muscle the market around in short dated options. It appears they don’t have things figured out yet.
Understanding the volatility helps price the moves out and create trades.
I am doing a basic volatility course in the Trading Desk today. Look for the note in OP Live this morning.
To Your Trading Success,
-AG
Andrew Giovinazzi
30-Year Trading Pro