Anika Begay
The VIX is your friend, not your enemy. The massive resurgence in volatility (as measured by the Cboe Volatility Index – VIX) has revealed market vulnerability coupled with significant uncertainty. But it has also uncovered market opportunities. With the VIX hitting a multi-year high of 65 this week, elevated option premiums offer higher risk/reward scenarios. I want to establish a bullish view on the S&P 500 ETF (SPY) that allows an investor to weather further volatility reverberations while positioning for markets to move higher later in the year. .VIX YTD mountain Cboe Volatility Index, YTD The VIX, also known as Wall Street’s “fear gauge,” jumped above 60 earlier this week, the highest level since pandemic-induced volatility returned in March 2020. It’s the highest reading on the index outside of two memorable market crashes, the Great Financial Crisis resulting from the bankruptcy of Lehman Brothers in September 2008 and the global pandemic, Covid-19, in early 2020. I believe we are still in a range when it comes to the S&P 500 and that using the technique can help establish a view. Using a risk reversal can test a trader’s stomach to own the market during these sharp moves, but it also allows an investor to participate in a rapid move higher if and when markets calm down. The trade sold the 10/18/2024 SPY $500 put for $8.00 Bought the 10/18/2024 SPY $550 call for $8.25 This spread was established when SPY was trading hard $530 This risk reversal cost $0.25 or $25 for one lot An investor needs to be comfortable owning the S&P 500 around 5,000 and will also need cash set aside since this trade is selling a cash covered put. In case you disagree with my bullish view, feel free to take the other side of this trade. Every buyer needs a seller. DISCLOSURES: (Long this spread, Long SPY, Short SPY $520, Put $525) All opinions expressed by Vscek Pro contributors are solely their opinions and do not reflect the opinions of Vscek, NBC UNIVERSAL, their parent company or affiliates, and may have previously been disseminated by them on television, radio, the Internet or other media. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND OUR PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT THE UNIQUE PERSONAL CIRCUMSTANCES OF ANY INDIVIDUAL. THE ABOVE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISION, YOU SHOULD STRONGLY CONSIDER SEEK ADVICE FROM YOUR FINANCIAL OR INVESTMENT ADVISER. Click here for full disclaimer.
in Business
An options strategy that will win during a market recovery, while withstanding higher volatility
