The market is falling, the VIX is going up, massive inflation everywhere, the Fed wants to regain control (the wrong way), raging viruses, SNAP is laying off 20%, Russia and China wants to take over the world, etc...
... but the CBOE SKEW index is fairly low.
CBOE SKEW Weekly Chart
What is the SKEW?
It's an index that shows the outlier risk. In other words, a complex set of calculations shows a number (index) which indicates the likelihood of a move greater than 2 standard deviation in the next 30 days.
What is the 2 standard deviation?
It's basically 95.44% of occurrences. It applies to everything in life. For example, if you record what you have for breakfast every morning for the next 12 months then one would be able to estimate the likelihood of you having porridge tomorrow.
Going back to my original topic, if the SKEW index is low than there is a slimmer chance of a large move.
What makes traders' lives difficult is the noise broadcasted by the media and everyone. Including me. Everyone has opinions and feelings and they may or may not influence our decisions.
So what's my trade for today?
#BBY (#BestBuy). Earnings came out today and after the initial jump the price settled where it was yesterday. I went for a relatively wide strangle but still remained in September. If the price moves against me than I can roll to October.
BBY Daily Chart
Trade Type: Short Strangle
Strike: $65 / 83
Expiry: 16 Sep
IV Rank: 24.3
Cap Req: $750
Annualised Prof at Expiry: 203.%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.