Plunging Markets, Big Wins and Why the VIX is Broken

by | Sep 16, 2022 | Options

Tuesday saw the worst single-day drop we’ve had since June 2020, with the S&P 500 giving back 4.3% of the 5.1% rally we had in the four days leading up to the freefall.

Weeks like this one are a perfect example why the big-money traders haven’t wanted their capital invested in this market for too long…

It’s also a lesson on why we can’t rely on lagging market indicators like the VIX volatility index, also known as the “fear gauge.”

After falling off a cliff Tuesday on another red-hot inflation reading, markets attempted to rebound the next day… only to fall again on Thursday.

If you’re out there falling in love and holding on to your stocks for dear life, odds are good you have more gray hair now than you did at the start of this roller coaster…

But because we followed the smart money’s lead, not even the insane volatility could keep the New Money Crew strategies off of the scoreboard!

Heavyweight Trade Alerts Scores a Huge Goal With MANU!

With market conditions like this, you won’t see me committing to long-term positions — I’m locking in winners when I can and moving on to the next trade.

And that’s exactly what we did in our Master Indicator-based strategy Heavyweight Trade Alerts

The indicator signaled on Sept. 12 that shares in professional soccer club Manchester United plc (NYSE: MANU) were breaking higher.

 We picked up the MANU Oct. 21 expiration, $15 strike calls at around $0.55 at 10:30 a.m. EDT Tuesday, and the Reds went marching on… by 2:30 p.m., we sold the second leg for $0.90!

For those of you keeping score at home, that’s a 64%* move in four hours — square in the middle of the market’s worst day in over two years!

The win crushed all of our averages — since its inception on May 19, Heavyweight Trade Alerts has a 73% win rate, with an average return of 15% over a six-day average hold time.

And this wasn’t the only strategy with reason to cheer… Alpha Sweep Alerts, Weekly Blitz Alerts and Wiretap Alerts all chipped in with gains on Macy’s Inc. (NYSE: M), PubMatic Inc. (Nasdaq: PUBM) and Wendy’s Co. (Nasdaq: WEN), respectively!

Why You Can’t Rely on Lagging Market Indicators

It’s more important than ever to be selective, stay nimble and trade small to keep us from getting burned on knee-jerk headline reactions like we saw Tuesday…

But as you can see, there are still amazing trades to book if you stick to that short-term options strategy, even in this choppy mess.

These markets can move so fast, they’ll snap your neck… And if you think you can rely on lagging market indicators like the VIX to keep you up to date on how volatile it is out there, you’re in for a rude wake up.

It’s true the index spiked as much as 16% from Monday’s close, but most of that move didn’t happen until the afternoon. While the S&P 500 gapped down 1.75% at Tuesday’s open, the VIX was clocking a sleepy 2.5% increase.

Senior Strategist Roger Scott, Joy of the Trade’s Jeff Zananiri and I dove into the lagging VIX at Wednesday’s WealthPress Live Roundtable, and why a lot of traditional market indicators aren’t reliable in this environment. You can catch the replay up top! 

P.S. Every week, it seems like nasty headlines wreak havoc on perfectly good trade setups…

But a simple tweak in my approach has made all the difference. 

Instead of trading during “normal” trading hours… Monday to Friday…

I’ve been able to skip all the weekly news madness by trading Friday to Monday…

For the last year, I’ve been sharing this “weekend trading” theory with a small group of folks…

And so far the results have been insane — a 502%* total return over the past year, in fact! 

Find Out How to Get in on My Next Round of Trades

*Stated results are typical for a given period. Past performance is not indicative of any future results. Trade at your own risk. From 9/20/21 to 8/31/22 on live trades the win rate is 70%, the average return is 15.4% on options over a three-day average hold time, with a total portfolio return of 502%.

WRITTEN BY<br>Lance Ippolito

WRITTEN BY
Lance Ippolito

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