Reflecting my general skepticism about this one-day wonder rally, I've gone long volatility with an option spread. I bot the SPX August/September 995 put calendar for $10.50. This trade is really two trades rolled up into one. First, I sold the August 995 strike put for $16.30. That means that somebody thought it was worth their while to buy an insurance policy from me just in case the SPX breaches 995 by August expiration. Right, like that's gonna happen. Next, I bot the September 995 put for $26.80, because the SPX may very well retest its recent swing lows.
The astute numbers-minded trader will immediately see that putting this trade on results in a net debit. Ah yes, but I fully intend to sell it for more that what I paid for it. The expectation is that outside of the ice cube melts faster than the inside of the ice cube. Or, all of the out-of-the-money value for the August insurance policy erodes quicker than the one in September that I purchased.
This trade is long volatility. When you are long "a thing" in trader's parlance, you have the expectation that it will rise in value and then you will have more monies than you had yesterday. Same thing with long volatility. VIX goes up, SPX options go up, the spread makes some dinero.
SPX is still pit-traded, but those days may be coming to a close. So jump into the pit for a bit of history before it's too late.
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