Capitalizing on moves on the $SPY
Wow, what a day yesterday was! First, at 10:10 am ET, Bloomberg disclosed that based on “five people familiar with the matter”, a limited trade deal with China would soon be announced by the White House. SPY skyrocketed to make a new all-time high! And then, at 10:50 am, the White House denied the report and SPY took a dive. Nevertheless, investors seemed to be in an optimistic mood because SPY did make a new all-time high! What a yoyo on SPY today!
How can we capitalize on these big moves on SPY? I think trading TVIX is more capital efficient. SPY is trading at $300 “ish”, and its ATR is $3, only 1%, and therefore not volatile enough for day traders. Instead, TVIX is trading at $13 and its ATR is $1.88; meaning almost 14.5% volatility intraday! Therefore, I prefer to trade TVIX instead, and in the opposite direction of SPY. Perhaps I should resolve to start trading more volatility ETFs!
Just as an example, when the breaking news came in at 10:10 am and SPY squeezed up, I shorted TVIX on its pull back at $13.80, covered it in a few steps at $13.50, and then eventually got stopped out at break-even. It is very important to wait until you can get a good entry on pull backs, and always remember to not chase the move. I will make a video about trading TVIX when I am back next week in Vancouver. I promise!
Speaking of travel, I am in Montana, near Big Sky and Yellowstone National Park. It is gorgeous here, and pictures cannot begin to describe the actual beauty of this incredible place! I encourage all of you to visit this amazing spot. Follow me on Instagram and follow the photos and videos I am sharing!
I was invited here by one of our traders who I met a few months ago at our Austin, TX meetup. It was the first time we had met, and he was kind enough to invite me to his place, and now we are friends for life! That is one of the things I love about our community: you can build great friendships outside of the actual hours the markets are open.
I encourage everyone to attend our meetups and make friends!