How to play the VIX, Tesla earnings using options

00:00 Speaker A

With uncertainty remaining the connection connected the thoroughfare volatility has entered a caller phase. So however should options traders tackle the shifting rules of the volatility game? Baycrest Managing Director David Bool joins america present for the options playbook sponsored by Tastytrade. David, it's large to spot you. So you accidental here, David, VIX 30 is the caller 20. What what bash you what bash you mean by that, David? Walk america done it.

00:35 David Bool

Well, investors person gotten precise comfy implicit the past year, truly since COVID, that VIX benignant of stays successful this scope successful the mid-teens. And past if there's immoderate benignant of a panic, immoderate benignant of crushed for hazard off, it spikes supra 20, sometimes gets to 30, sometimes adjacent higher, but past the sell-off is arsenic terrible often times arsenic the spike higher. We saw that successful August of 2024. This is different. I would comparison this much truthful to the COVID daze from a volatility position wherever you get the large determination up done 30, up into fif successful the 40s and past we conscionable benignant of person a caller baseline. It's precise akin besides successful that there's a batch of header hazard successful the marketplace wherever we're trading disconnected of evidently Trump tweets and uh posts that helium puts out. Similar to COVID wherever it's conscionable immoderate uh quality nonfiction tin determination the market. That's astir much important than the existent economical information and earnings. We saw Netflix conscionable present is moving conscionable 5% aft its net report. That's a small little than what net were anticipating for that determination today. So but you know, a Trump tweet implicit the play could determination markets overmuch more. So erstwhile I look backmost astatine what VIX did during COVID, it stayed supra 30 uh and truly didn't get backmost beneath 20 until full twelvemonth from the archetypal spike. I deliberation investors are conscionable going to get utilized to this VIX astir 30 range, which implies astir a 2% determination each day. Um and that's benignant of what we've been seeing successful April and I deliberation that's present to stay. It's not a re it's it's a caller authorities that we're in.

03:06 Speaker A

So arsenic we beryllium successful a a higher volatility environment, possibly uh structurally, astatine slightest for a small while, wherever are the wherever the opportunities that you spot successful the marketplace to uh to instrumentality vantage uh done options?

03:33 David Bool

So I for clients archer maine the VIX is simply a small spot successful nary man's onshore close here. It's astatine 30, truthful it's you know, if galore had a clip machine, they would emotion to spell backmost and bargain a batch of enactment premium erstwhile VIX was 15, but present that options are a small spot much expensive. Um I I spot clients, immoderate of them are a small spot frozen wherever they're saying, wow, hedges are a small spot excessively costly to bargain up present with VIX supra 30. Um and besides galore are petrified uh to to merchantability partition to slice it going lower. I I disagree. I deliberation there's opportunities connected some sides. If you get a small spot much clever with however you operation the trades, I deliberation you privation to play a scope connected either broadside and you tin usage immoderate of that costly volatility uh successful our favour erstwhile we operation positions each portion keeping it constricted to the premium spent. That's precise important. I'm not suggesting that you um merchantability a VIX 40 onslaught telephone and person the hazard of stroke up hazard retired there, but I'm seeing folks uh look to slice volatility backmost into the little 20s, mid 20s, little 20s with uh enactment flies connected VIX. I deliberation those are absorbing and I besides deliberation there's scope bound trades to inactive enactment hedges connected present wherever you tin get paid, you know, five, six, 7 times your wealth successful a precise realistic range.

05:37 Speaker A

David, speaking ahead, Tesla net connected platform adjacent week. Uh is determination a commercialized there, David, to locomotion america through?

05:52 David Bool

Tesla is truly interesting. Speaking of trading successful a range, it hasn't it's been successful its ain Tesla range, which is astir $50 uh either possibly $60 either broadside of 240 wherever it adjacent astir wherever it closed today. Um the sentiment's beauteous horrible successful Tesla, particularly wherever I americium retired present successful California, and I consciousness similar a batch of atrocious quality whitethorn beryllium priced into the banal and it's travel down from 500 to 240. You know, I I saw an absorbing telephone dispersed play a uh, you know, imaginable determination backmost up to the precocious extremity of the scope earlier this week. So the commercialized that I would enactment connected um to payment if the banal does spell higher is the April 25th, adjacent Friday, 265, 285 telephone spread. Um you're risking astir $2.75. It's not overmuch premium to beryllium capable to uh payment from astir a 7 times your wealth payout if the banal goes backmost higher. That's astir you get vulnerability to up 10, up 20% range. Um truthful portion the banal has been lower, 5 of the past net prints, erstwhile it goes up, it truly goes up. So there's been an up 20% move, an up 12% move, etc. So if you deliberation that net adjacent week are a small spot of a coin flip, I similar taking that coin flip and getting paid five, six, 7 times connected wealth if that payout hits.

08:24 Speaker A

David, large to spot you and to person you connected the amusement today. Thank you.

08:30 David Bool

Thank you.