Thursday Shopping List

Vol crush on the horizon.

It’s Thursday morning, and the market survived both the FOMC minutes and NVDA earnings. The only question remaining is how green we are going to end on Friday and whether the VIX will close below 14 again.

There is a plethora of Fed speakers today, so we never know what can happen. However, we must say that finding something with the potential to temper the mood over the next 48 hours isn’t easy.

Yet, again, we never know. And that is precisely on that ounce of doubt and uncertainty that we’ve built the Thursday Shopping list: we are trying to capture the mispricing in very short-dated options, driven by insensitive flow concerned about what could potentially happen in the last few hours before the expiry.

If you want to read more about the approach, have a look at these articles.

Let’s dive in.

The list

Before we start, a quick reminder about the execution:

• Short an ATM straddle in the 1DTE contract 23/02 as close as possible to the close on Thursday night. In all our metrics and charts, we assumed an execution at 3.50 pm, but the timing of entry doesn’t matter too much: avoid getting in too early, but getting in too late gets you less premium.

• Exit the position as close as possible to the expiration on the Friday. Again, we assume an execution at 3.50 pm, but it can be useful to manage the position earlier, depending on your risk tolerance and how happy you are with the returns.

• One word of caution: if you get assigned, get out of the trade completely. Get rid of the underlying: if you decide to keep it and “sell premium against it,” it is at your own discretion and outside of the scope of this strategy. It’s okay to keep the other leg expiring out of the money: there is no reason to pay an extra dime to your broker.

We talk more about position management in the Discord Channel, and speaking of which, we are slowly building up the community: the conversation so far has been great and sparked the inspiration for yesterday’s article.

I’ll reach out to those who have expressed interest by the end of this week with an early adopter discount. I don’t want to overcrowd it so that it can stay nice, warm, and interactive: don’t miss your spot ;)