“Feeling the air coming out of the volatility balloon!”
I said it yesterday, and it bears repeating today … “except for GBPJPY, it’s
been a very long time, since I’ve witnessed such a complete collapse in intraday
volatility, from total “ape shit” crazy to “no shit” movement within days, across
all markets” … quite frankly, it’s hard to swallow that this is purely a market
function and NOT the heavy hand of government interfering once again
where they have no business.
And it isn’t just cuz the “Brexit” drama saw the U.K. government survive for
another day … “hell, the only thing more pathetic than May’s government,
would be the one led by the marxist Corbyn, and his “Free Shit Army” of Labor
goons” … no, every market from stock indices to crude oil has seen volatility
go “Thelma & Louise” at the same time … and this presents two [2] major
problems; 1) big money is still positioned long volatility, and 2) markets are
still overpricing implied volatility [IV] cuz traders and market makers at
scumbag LP banks are “scared shitless” … the attitude being, “better be safe
and over price shit, or be sorry and get steamrolled by 1) Trump, and/or
2) anything else, and watch losses mount quickly”. Bottom line is simply this:
“somebody or a groups of somebody’s is getting their collective asses handed to
them courtesy of the market manipulators, and it could be a little while before the
dust settles”.
I went out on a limb some blogs ago, and stated emphatically that this was the
“top” in volatility, and that at least for stock indices, it could be at a minimum
4 - 10 weeks of falling 20 Day Range MA’s [maybe more], before pricing got
back to normal … in the meantime, you buy it and overpay for it, and you will
regret it. And, as you should notice, there haven’t been any RUT2000 trades
I’ve made lately … they went from reasonably priced to insane right after
Christmas Eve, which is/was the “top” in terms of “real volatility”, and got
everybody and their brother to suddenly realize, “hey Skippy, I think shit is
volatile now, so why don’t we either take protection against loss, or play both
sides”? … wonderful thought, right at the top! … and while premiums are still
high, they are coming down grudgingly, but they need to come down some
more. Yesterday saw ZH have an interesting article on this, and I’ve included
the link below for those interested.
-time-contrarian-trade
Starting from yesterday’s date, we are tracking and will be charting for weekly
Sunday release on the blog updates, the opening level of the “floor & ceiling”
equal strike Call Spreads in GBPJPY, that represent the “Volatility Call Spread
Strategy” for each day going forward … this will be invaluable information cuz
you will actually see this relationship plotted against the 20 Day Range MA. In
addition to the GBPJPY chart, that is plotted alongside GBPUSD & EURJPY,
we will be presenting a DAILY CHART of the relationship between the day’s
actual range, versus where the market priced the opening volatility for the
range at the open of trading the night before at 6PM EST … we will update
this weekly and put it on our Sunday night blog, and then quarterly, place the
chart in the archives under a new category for historical viewing and
comparison, and then start a new quarterly chart.
I think this new information will open a lot of eyes, and give you a fresh insight
into the “hows & whys” of volatility pricing, and then effectively trade it for
consistent profit. The fact that you can’t find this info anywhere, tells me it’s
invaluable for profits. And of course, you’ll get our analysis of what it all
means [we think!].
Last night saw the equal Call Spreads open at 82 PIPS, which is down from 90
PIPS the night before, but clearly overpriced … “now, what you have to
understand, is that just cuz something is overpriced, doesn’t mean it can’t get
more overpriced, and doesn’t mean if you buy it, that it can’t profit … it can
… but, it gets a helluva lot more difficult as you step up … and today’s price
action shows exactly that” … the move down from near the European open,
that saw the day’s low [so far], saw the CS’s go to about mid to upper 90’s
… that’s not a very good return for a move that was over 100 PIPS, and since
the low came on the infamous “V” formation bottom, prices for the CS’s
dropped quickly to the mid 70’s within a few minutes … since then it’s been
“chop city”, and the CS’s are stuck around 70 PIPS as the New York session is
about to get underway here shortly. And, as New York comes in, GBPJPY
leaps higher back to the 140.30+ level and thus crushing the CS’s spread down
into the 50’s. The lesson here should be obvious: “Just cuz you get volatility,
don’t assume it goes in a straight line and helps you … so, don’t overpay for
volatility”!
I need to mention here, especially for newer readers, that all Call Spreads, no
matter the market you’re trading, are priced in US Dollars, and the minimum
tick in each market = $1 per 1 lot. Therefore, unlike spot GBPJPY trades
which are priced in Yen, NADEX GBPJPY are priced in Dollars, not Yen.
Secondly, GBPJPY at NADEX drops the third decimal and is bid/offer priced
with 2 decimals, with a minimum tick of 0.01, which again = $1 per 1 lot
… this actually makes Cable/Yen even more volatile than traditional offshore
brokerage house trading by about 8% at current USDJPY rates.
Also, for smaller accounts especially, trading GBPJPY [as with other FX]
when done properly has much less Dollar risk than other markets offered at
NADEX, cuz of the way they are quoted and priced versus oil and the stock
indices … this is another reason why we have decided, unless pricing goes way
lower in the other markets, to maintain our focus on GBPJPY [and
secondarily EURJPY when appropriate] … “it gives the consistently biggest
bang for the buck, while at the same time we can effectively reduce risk to very
manageable levels, in a very high volatility atmosphere” … simple as that.
You know markets are desperate when “Philly Fed” & jobless claims move the
market … desperately seeking some movement to unload Vol positions gone
bad … and with Monday being MLK Holiday and markets are closed, expect
more of the back & forth between now and then. However, Monday sees May
deliver “Plan B” for “Brexit”, and NADEX is closed Monday … so, whatever
BS she comes up with, we’ll miss it.
Today’s action does no favors for any overnight volatility strategy, simply cuz
price has reversed today from early Europe open lows and gone back up and
made a new high … time gets wasted, premium gets evaporated, and the CS’s
shrink … like I’ve said before and stressed, “the first move out of the box is key
… if it’s shallow, the turn around will be strong and not hurt the CS’s … if the
reversal comes from a deeper move, the most often scenario is for these FX
markets to reverse to a new high/low and then stumble … you get the range, but
you don’t get the proper action, and it hurts the CS’s … today proves my point,
cuz from last night’s opening price @82, on the drop it went into the mid 90’s
… however, on the rally backup to new highs, it has stumbled, and with price
just backing off a tad from its new high, last night’s CS’s are @ 41 … if you held
on, you’re toast, and this is why I say the first move out of the box matters the
most, and that’s why what you pay for volatility MATTERS”! And now, finally,
on this move over 141.00 the original call spreads still wouldn’t pay off … this
isn’t what I’m looking for folks, which is a hope & a prayer it moves “bigly &
yuge” to bail me out … it moved, but not nearly enough. [It has since moved up
to 141.375, and with an approximate 180 PIP range for the day … finally
… the original Call Spreads with the 140.50 equal “floor & ceiling”, are now
above where they were at the open last night … some deal, huh?]
I told signals service subscribers earlier in the day, that this looked and felt
like it was going higher into the close, but that taking a long position you had
to wait for some kind of break with tight risk … so far, it hasn’t done that.
This squeeze higher is getting ahead of itself, and I’m hoping today’s action
doesn’t blow premiums out any further than they have … we’ll see.
So, no signals today, simply cuz they’re too expensive … you’re overpaying for
volatility that isn’t there. We’ll see what tomorrow brings … I’m outta here
… Onward & Upward!!
Have a great day everybody!
-vegas
OUR NADEX SIGNALS SERVICE IS UP & RUNNING … DAILY
WTI CRUDE OIL SIGNALS & “VOLATILITY” STRATEGIES
IN 20 OTHER MARKETS, INCLUDING COMMODITIES, FX,
& STOCK INDICES! … “what on earth are you waiting for”?
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