Once In A Lifetime SKEW

last month

Let me be crystal clear. Opportunities like these only present themselves once or twice in a lifetime. I am dead serious about this. What is going on in the marketplace right now is absolutely unprecedented. However I would bet you good money that 99% of retail traders are completely unaware.

Now that I have your undivided attention let share another little tidbit with you. You are wasting your time looking at and debating price. This is NOT where the action is.

Yes the market is going up. Tell me something I don’t know.

So you could play the long side via stocks or options perhaps. But just look where we’ve been since April and then remind yourself that we are heading straight into the mid-summer rotisserie churn. Paging George Foreman!

Nah, you’re not looking close enough, so let me give you a hint. Look at that expected move range – it’s a whopping 48 SPX handles.

Now if the next thought in your mind wasn’t ‘WTF’ then you haven’t been paying attention.

Let me illuminate you: Last week’s expected move was roughly 90 handles. And what did we get? 120 handles!

So why in the name of all that’s holy is this week’s EM range set at only 48 handles?

Especially in the face of SKEW scraping all time highs. I’ve been trading for nearly 20 years – 12 of those professionally and let me tell you: I have never ever seen anything even close to this reading.

So here’s take away #1 for this week: Whatever yo you refrain from selling any front month IV.

Why? Because the odds of this 48 point EM range being touched are significant.

And the odds of IV dropping much further pretty low at this stage as we once again are kissing our baseline.

Since I’m not one to miss out on free money here are two simple butterflies I just took out and posted over on the RPQ trading floor. If you hurry up you may still grab them at a decent premium:

BUY +10 BUTTERFLY SPY 100 (Weeklys) 2 JUL 21 424/423/422 PUT @.04 LMT

BUY +10 BUTTERFLY SPY 100 (Weeklys) 2 JUL 21 430/431/432 CALL @.05 LMT

Now that covers the easy stuff. The juiciest opportunity – and the one that’s hiding in plain sight – awaits below the fold:

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  • Mike
  • last month

About the Author

Hey there, I am one of the founding members of Red Pill Quants. I used to work as a systems engineer in Silicon Valley until I left the industry in 2008 to become a full time quant trader. It's been fun ever since.