Trading Volatility Using This Indicator | Jeff Bishop – Weekly Money Multiplier

Stocks are trying to stay green, as they look to regain losses from yesterday. Catalysts this week include the World Economic Forum, corporate earnings releases, and Brexit uncertainty.

It feels like things could go either way. One day, it’s risk on, buy everything… the next day, the world economy is grinding to halt, and it’s sell everything.

No wonder most money managers can’t beat the market. There are just too many outliers, catalysts, and macro-variables in play, to predict where stocks will be a year, two, or three from now.

Buy…hold…pray… 

No, thank you. 

I prefer windfall profits.

Like yesterday’s $90,029 cash grab.

That’s what the average NBA player makes per game. But I didn’t have to lace up to get those returns… I just needed to turn on my iPhone and log into my brokerage account.

You see, the beauty behind my strategy is that it works under any market condition… bullish or bearish… the money comes out the same way.

My trading style is designed for people who don’t want to wait… it’s for those who want fast profits.

Now, if you’ve been following me over the last couple weeks, you know I’ve been tracking volatility. I find it’s a useful tool in measuring investors sentiment and appetite for risk.

If you read my post last Friday, Volatility Shifts – Will You Be Ready?  You know that I’ve been eyeing VXXB… I knew there was a trade brewing… and boy was I right…

…more than half of yesterday’s $90K profits came from one VXXB trade.

Now, this wasn’t a fluke. The writing was on the wall. In fact, this trade is one of the easiest $50K winners I’ll have all year.  Find out why, how you can spot it next time.

Trading Volatility Using this Indicator

There’s a lot going on, macroeconomic wise… but the market seems to be brushing it off. We’re not seeing the panic like we saw last month. However, there are risks that no one’s really talking about.

• The U.S. – China trade war is still ongoing, and it doesn’t seem like either side will budge any time soon. There’s risk that these countries could start to imposing tariffs, which would affect many stocks – potentially leading to a crashing market.
• Growth rates are slowing. China’s Gross Domestic Product (GDP) growth rate in 2018 was the slowest in nearly three decades. Moreover, the International Monetary Fund (IMF) cut its global growth forecast for 2019. That said, the U.S. will release its 2018 GDP growth rate next week. Now, if the U.S. GDP growth rate comes in below expectations, we might see the start of a market selloff.
• The Federal Open Market Committee (FOMC) is still looking to raise interest rates two times this year. If voting members decide to increase interest rates, coupled with slower GDP growth, it could spark a market downturn.

Usually, the market prices in risk. However, it doesn’t seem like it’s even considered these are risks.

That said, who would want to short volatility in this market environment?

The market and U.S. economy have had a historic run for over a decade – and there’s still a lot of tension in the macroeconomics. If there is, in fact, an economic downturn, look for extreme moves in the market.

You might be wondering, “Okay Jeff, I get it… this is an area where I wouldn’t short volatility, but how would I buy volatility?”

Well, since the iPath S&P 500 VIX Short-Term Futures ETN (VXX) is expected to mature on January 30, 2019… you’ll have to look to another exchange-traded note (ETN) – the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXXB). That said, I figured volatility could get out of whack since traders are still trying to figure out what’s going on with the volatility shifts.

The changes in volatility products and macro-economic risks allowed me to come up with the trade idea in VXXB.

Moving on.

For the most part, I like to use options to express my opinion on volatility – and I combine my chart patterns to spot winning trades like VXXB.

Check out the chart above. I was waiting for the 13-period simple moving average (SMA) – the blue line – to cross above the 30-period SMA – the red line – on the hourly chart. This is what I call the “money pattern.”

What do these two lines tell us?

Well, it gives us an idea of when there could be a shift in trend. We’ve seen volatility pull back quite a bit already… and it looked to find a bottom. Now, keep in mind I was in this trade before the blue line crossed above the red line.

You see, these indicators are considered lagging indicators. In other words, they lag behind price movements, so you need to use experience to spot when there’s a high probability of a cross over. That said, it helps to have a mentor who has used this indicator countless times to generate 100%+ profits consistently.

However, notice the specifics here. I’ll look at charts to spot potential money-pattern trades.

Thereafter, I look for macro-economics that might signal potential risk. I don’t get into trades unless I have conviction the 13-hourly SMA will cross above, or below, the 30-hourly SMA.

Just using the specificity of my patterns and macro-economic risks allowed me to generate 100%+ ($50,750 in dollar terms) in the VXXB trade alone.

I prefer to be in and out of trades. I’m not trying to guess where the market will be six months or a year from now… that’s a fool’s game. Instead, I’m looking for specific catalysts and patterns that can multiply my money.

If you’d like to know more about trading style, you should read the latest edition of my ebook,  30 Days to Options Trading.