00:00 Speaker a
Due to uncertainty, words on street volatility have entered a new stage. So, how should traders deal with the changing rules of volatility games? Baycrest Managing Director David Bool is now joining us in the option script sponsored by TastyTrade. David, it's great to see you. So you say here, David, vix 30 is the new 20. David What do you mean, David? Take us through it.
00:35 David Boole
Well, investors have been comfortable over the past year, and this kind of Vix has remained in this mid-year range since Covid. Then, if there is some kind of panic, some reason for the risk, it will be over 20 years old, sometimes to 30, sometimes even higher, but the sell-off time is as severe as the spike is higher. We saw it in August 2024. This is different. From a volatility perspective, I compare it to the common shock, where you got a big 30 shot in the 40s and then we had a new baseline. This is also very similar, as there are a lot of headline risks in the market and we are trading from obvious Trump tweets and UH posts he issued. Similar to Covid, except that any UH news article can be transferred to the market. This is almost more important than actual economic data and benefits. We see Netflix just moved just 5% after its revenue report. This is a little less than what we expect today’s revenue. So, you know, the Trump tweets over the weekend may shift the market more. So when I look back at what Vix did during Covid, it was always 30 UH and it didn't recover until the year-round until it was the original Spike. I think investors will only get used to the VIX of 30 ranges, which means about 2% of the action per day. Well, that's what we saw in April, and I think it's going to stay here. This is not the new regime we are in.
03:06 Speaker a
So when we sit in a higher volatility environment of AA, maybe structurally, for at least a little while, where are the opportunities you see in the market that you can take advantage by choosing?
03:33 David Boole
So, I told me for the client that there is no land for anyone here in vix. It's 30, so you know, if many people own a time machine, they'd love to go back and buy the Vix when they were 15 years old for the premium option, but the choice is a little more expensive now. UM II saw customers, some of them a little frozen, and they were saying, wow, the hedge is a little too expensive to buy here on VIX over 30. II disagree. I think both sides have a chance. If you're smarter about how the deal is built, I think you can use some expensive volatility uh when you want to play a range on either side and you can limit it to a limiting premium while we sort out the position. This is very important. I'm not suggesting you sell Vix 40 strike phones and risk the explosion, but I'm seeing people expecting to fade out of their 20s, mid-20s, lower 20s, uh uh put flies the vix. I think these are interesting, and I also think that range deals can still get hedging here, here you know, in a very realistic range, five, six, seven times the money.
05:37 Speaker a
David's Tesla earnings on deck next week. Well, there is a deal there, David, take us through time?
05:52 David Boole
Tesla is really fun. Speaking of a range of deals, it's not in its own Tesla range, about $50 UH may be $240 for $60, which is in the closed position today. Well, this is very horrible at Tesla, especially where I am in California, and I feel a lot of bad news may be priced as stocks and drops from 500 to 240 to 240. So if the stock is higher, I'm going to trade UM on April 25th, next Friday, 265, 265, 285 Call spread. Well, your risk is about $2.75. If the stock returns to higher, you can benefit from seven times your monetary expenditures not high. That's about you're going to get a 10% growth range of 20%. Well, despite the lower stock, there are five of the final revenue prints, and when the stock goes up, it does go up. Therefore, 20% of the shares were transferred, 12% of the relocation, etc. So if you think that next week’s income is a bit like a coin flip, I like to do coin flips and get five, six, seven payments if the expenses are paid five times.
08:24 Speaker a
David, it's great to see you and will be able to attend the show today. Thanks.
08:30 David Boole
Thanks.
