These wild swings are like the big hills on a roller coaster and definitely make you queasy. Last Thursday, the Dow shot up almost 1300 or 4.5%. Then Friday it fell 2%. Today it looks like another wild ride. Trying to time this monster with traditional trading is not a good idea. To find profitable trades we have to step back and look at what we know is absolute.

Right now, volatility is as sure a bet as you will find. The VIX, and indicator from the CBOE that tracks expected volatility, is at the top of the range we have seen since the COVID crash. Take a look at the chart and we will go into how to take advantage of this bouncing market:

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The top of the range has been in the 35-40 range since the pandemic started. It hasn’t broken above that all year. We can definitely expect to continue to see these big moves at this point, but it is likely the VIX will move back to the low end of the range as it has 4x this year.

If you are an option trader, this is a great time to take a look at credit spreads. They are able to provide high potential return with a fixed amount of risk. This allows you to select a trade with a risk/reward ratio that fits your comfort zone.

Another alternative is to look at ETFs that track the VIX. The advantages of using ETFs is that you can use your stock trading account to take advantage of these moves. Also, you can select from the UVXY which moves up or down as the VIX does, or look at SVXY which is the inverse of the VIX and goes down as the VIX goes up and goes up as it goes down.

With the VIX at the top of its year long range, SVXY is a trade to consider.

It is currently pushing against the 10 day moving average and if we can see it break through it is likely to reach for the 50 and 200. in addition the MACD is showing it slightly oversold.

Don Fishback covers some great ways to spot option trades with the highest probability of producing wins. If you haven’t grabbed his quick start guide yet, you can get it here for free.

Keep learning and trade wisely,

John Boyer


Market Wealth Daily