If the market keeps mis-pricing fear, it’s time to buy some VIX fear options

If the market keeps mis-pricing fear, it’s time to buy some VIX fear options

When AI stocks plunged on Monday on the news out of China’s AI startup, DeepSeek, and fears that this meant the end of the AI ‘bubble,” shares of AI stocks such as Nvidia (NVDA) and Broadcom (AVGO) plunged 17% and the NASDAQ Composite tumbled. But the market as a whole was remarkably unperturbed. The CBOE S&P 500 Volatility Index (VIX), the “fear index” did climb by 20%.
TO ALMOST 18. 18? The 10-year average for the VIX is 18.26! So with the prospect of a collapse in the AI bubble–which I don’t see despite clear extremes of valuation in the sector–the AI trend is real and revolutionary. With the possibility that the Federal Reserve will dash hopes for interest rate cuts in 2025. With the possibility that a renewal of the 2017 Trump tax cuts and new tariffs will revive inflation. With the possibility that the ungovernable extremes of the Republican party will be unable to govern and will really shut down the government in a huge debt ceiling/budget fight. With all of that danger lurking out there, the VIX traded at just 18 on Monday and closed at 16.56 today, January 29? In my opinion this hedge on risk is on sale.

Special Report: My 5 Favorite Shorts for This Market–Short #4 Retail stocks using a Put Option on the XLY ETF (1 more Short Pick to come)

Special Report: My 5 Favorite Shorts for This Market–Short #4 Retail stocks using a Put Option on the XLY ETF (1 more Short Pick to come)

Investors and the market indexes remain convinced that the economy will dodge a recession, even if only narrowly. Retail companies, however, aren’t nearly so sure. In the last two days, both Home Depot (HD) and Target (TGT) have cut guidance for the quarter(s) ahead. Consumers, they say, are hesitant to take a trip down the aisle devoted t discretionary goods such as furniture and apparel. With the New York Federal Reserve reporting that consumers look increasingly stretched on their credit card balances, I don’t see that reluctance ending soon. So even if the economy as a whole dodges a recession, I think the shares of companies in the consumer discretionary sector are likely to report their own sector-specific recession or the next quarter or two.

Buying more VIX Call Options on Monday because this market is just too complacent

Buying more VIX Call Options on Monday because this market is just too complacent

The VIX “fear index,” known more formally as the CBOE S&P 500 Volatility Index (VIX), dropped again today with a retreat of 3.60% taking the index down to a close of 17.16. The VIX, which measures the price that investors and traders are willing to pay in the options market to hedge risk on the Standard & Poor’s 500 in the next month or so, hasn’t been this low in 2022. The prior low for the VIX this year was 17.87 on February 2. You have to go back to December 27, 2021, when the index stood at 17.22 to find a roughly comparable level. With all that lurking out there in the financial world, I find the VIX at 17.16 too good to pass up.

Please Watch My New YouTube Video: Quick Pick Charles Schwab Put Options

Please Watch My New YouTube Video: Quick Pick Charles Schwab Put Options

Today’s Quick Pick is Charles Schwab (NYSE: SCHW) Put Options. Put options will become more valuable as the stock goes down in price. This has been a lousy year for Schwab with the stock currently down about 34% YTD. The reason for this is Schwab makes most of its money on the interest rate spread. Schwab stashes “excess” cash in customer accounts in sweep accounts that pay a very low rate of interest, and Schwab invests that cash in Treasuries, mortgage-backed assets, etc. at higher yields. This works when the overall rate of interest is low because customers have a relatively small incentive to actively move their cash to higher-yielding vehicles. When the Fed raises interest rates, however, some people who had formerly kept their money in these low-return accounts will move their cash to higher-yielding alternatives (often still within Schwab.) This reduces the interest spread that Schwab collects since the company now has to pay more in interest to retain those customers. In addition, Schwab invested that cash in long-term Treasuries and mortgage-backed assets, leaving the company sitting on a lot of unrealized losses in its bond portfolios as bond prices fell as interest rates moved higher. I question whether or not Schwab will be able to meet analysts’ expectations and/or warn on future results when it announces earnings on April 17. I would suggest Put options before the announcement. I added the May 19 Put to my Volatility Portfolio yesterday. For more options plays, subscribe to JubakAM.com.

Please Watch My New YouTub Video: Complacency Is Rising–Again

Please Watch My New YouTub Video: Complacency Is Rising–Again

Today’s topic is: Complacency is Rising – Again. I’ve been following the VIX closely throughout the recent market turmoil. The VIX is often called the “Fear Index” as it measures how much people are willing to hedge against the S&P. As you can imagine, the VIX shot up with the recent bank scare but has been coming back down again recently. The market has decided very quickly that the banking crisis is no longer a problem and they just aren’t all that worried. Similarly, the ICE Bank of America Merrill Lynch MOVE Index (^MOVE), considered the “VIX of the bond market,” showed a big jump during the Silicon Valley Bank and Credit Suisse problems, but has quickly started to come back down. These are two areas where I would buy a call option if they get low enough. I will not buy puts on these because I don’t think this volatility is over. Go to JubakAM.com to follow my volatility and options portfolios.

Please Watch My YouTube video: Trend of the Week There is No Trend

Please Watch My YouTube video: Trend of the Week There is No Trend

This week’s Trend of the Week: There is no Trend. When I was filming this video on Tuesday the 14th, the S&P was up almost 2%, the DOW was up almost 1.5%, the NASDAQ was up 2.23% and the VIX, which had been climbing higher with the Silicon Valley Bank collapse, was down almost 15%. Since filming, the markets dipped sharply with the threat of Credit Suisse going under, and have trended slightly upward since. If you’re going to trade in this market, you have to do one of two things. One thing is to be very fast, and trade on the bounces as they show up. The other tactic is planning ahead. Long-term in this market is about a week. A week prior to filming (3/6) I bought Call Options on the VIX (the volatility index) and I sold them on March 13 with a 108% return. On March 14, however, those VIX Call options were down 27%. Talk about volatility! The trend is, there is no trend. Subscribe to my JubakPicks.com to get timely posts on how to keep up with the chaos. For more options and other volatility plays, subscribe to JubakAM.com.

Time to take some chip money off the table–in the short run

Time to take some chip money off the table–in the short run

We’ve had a great one-week rally/bounce/whatever in chip stocks. Nvidia, for example, was up 17.42% for the week that ended on Thursday, July 21. Advanced Micro Devices (AMD) was up 8.71% in that same period. But I think there are good reasons for thinking that this move was just a very short-term gain in a long-term Bear Market that remains in place. So today, I’m taking some chip money off the table.