P1 Trade Alert —Income Into the Selloff + VIX Hedge Closed
An oil-shock, risk-off Monday (Hormuz strikes spiked crude ~+7% and cratered AI/memory chips) gave us a small pop in volatility —
Market Intelligence
Big picture: An oil-shock, stagflation-tinted risk-off day — Hormuz strikes spiked crude ~+7%, a record ~15% SK Hynix crash dragged AI/memory chips down, and gold sold off ~3% — into a huge event cluster, all while VIX stays cheap and the market is lightly hedged. Live scanner: SPY $749.87 · QQQ $713.23 · /MES 7,570 · GLD $366.94 · WTI ~$76.5.
Volatility (why we exited the VIX hedge today): VIX popped to ~15–16 off a low base — enough of a bounce to exit the long-VIX teaching trade, but still historically cheap with the futures curve in contango. Cheap vol = thin premium but inexpensive protection.
The event cluster is tomorrow: June CPI (Tue 8:30am) + Warsh’s first Congressional testimony + big-bank Q2 earnings (JPM/GS/C/WFC/BAC) — then TSMC/Netflix Thursday. A lot of gap risk in a lightly-hedged tape.
Rates hawkish & two-sided: 10Y 4.57%, 30Y >5%; June dots lean toward a hike, and FedWatch is even pricing a possible September hike. Relevant to the TLT idea on our radar.
Cross-asset split: crude up ~7%, gold down ~3% (GLD ~$367), TLT soft — a stagflation tilt, not a clean flight to safety. Directly on our watchlist (Gold, TLT).
Trusted Voices:
Liz Ann Sonders (Schwab): bull intact on earnings but a regime shift into a more “temperamental,” higher-inflation era; breadth is actually improving (~63% of the S&P above its 50-day).
Charlie Bilello (Creative Planning): the contrarian read — AI is near-term inflationary (memory/hardware prices rising) amid record froth (~60% of the S&P Buy-rated).
Danielle DiMartino Booth (QI Research): the bear case — argues the US is already in recession, flags private-credit and commercial-real-estate stress, and sees a binary rate path (>6% or <2%).
Bottom line: thin vol + a lightly-hedged, two-sided tape into CPI and bank earnings is a poor spot to reach for risk — so we cut a losing teaching trade, sold a little premium well below the market, and kept ~88% of our powder dry. Not a recommendation.
The Trades:
