Happy new all time market highs! What an impressive run this market has been on the last few weeks.
With so many markets at new all time highs it’s no surprise that volatility has been completely sucked out of this market. In fact, we are going to close the week with the VIX down near the lower end of it’s all time range.
With volatility so low it means there is no fear in this market. Everyone has been programmed to expect the market to head higher week after week.
No one assumes this market can move lower and with so many people on one side of the boat, it would be a prime time to throw everyone a curve ball.
This is why I expect a move higher in volatility over the next month. With that outlook in mind, we are going to look placing a bullish trade on volatility.
Put Spread – VXX
For this week’s Options Trade Of The Week we are going to take a look at selling a Put Spread on VXX which is one of the volatility ETF’s.
We are selling a put spread to benefit from either a move sideways or a move higher over the next few weeks in this oversold instrument.
We are heading into the summer months which tend to be a slower time of the year for markets.
Using a put credit spread would allow us to make money from:
- Time decay adding up and every day that passes allows us to make money
- Volatility decreasing. If volatility starts moving back down that will cause the options to get cheaper.
For this trade we will be selling the 16-Aug-19 22/20 put spread.
We are looking to collect $.79 or $79 per spread while risking $121 per spread.
For a complete break down of our Trade Of The Week make sure you review the video below. You will learn the details of how we are placing trade trade including how we plan on managing it from start to finish.
Feel free to contact me directly with any questions you might have. Mike@netpicks.com.