Betting On Brexit Using SPX Wednesday Expirations

One of the best trades this year was to bet on a volatility explosion before Brexit. Because the Brexit results will be on June 23rd, it was possible to buy SPX June 24th Options, and sell the June 22nd Options against it.

The key was to do this trade before everyone figured it out.

As seen, on May 31st, the difference in the straddles between those 2 days was only about 6 points.

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How do you play for an increase in the June 24th volatility? I went and bought the 2080 put calendar spread.

At the time, I bought the spread for 2 ½ . The reasoning for this strike was that the market had not sold off at all on any nervousness about the vote. A small sell-off, combined with the volatility increasing in the June 24 options, could make this a good trade.

brexit2 copy

In the next week, EVERYONE was mentioning the threat of a Brexit. The volatility of the June 24 options exploded. Note the difference in straddle price between the 2 expiration just 2 weeks later! The difference now was 16 points. Because of that increase, the 2080 calendar exploded in price. I sold the spread for 8 dollars!

brexit3 copy

The new Wednesday expirations in the SPX open up many opportunities like this. Keep in touch with future events, and try to jump on similar trades.

Get more of Chris’ timely market analysis & trade setups HERE

Chris Brecher

Chris Brecher Stock Vice President

Chris Brecher grew up in Jacksonville, Florida. Though he went to college for Paleontology and Marketing, he settled for being a Stock Broker. In watching the brokers in his office lose every time by taking shots in options, Chris wanted to find out who was making money on the other side.

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