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Today, Errol and Kay are benefiting from what Tom calls a “dead cat bounce,” in which during a wider scale sell-off, a little market bounce suckers everyone into getting bullish. He instructs the influencers to “sell into strength”--get short when an underlying stock price goes up.

The kids put their own respective bearish trades on, selling into strength:

• Kay puts on a short call spread in ULTA and a bearish ARKK skewed iron condor.
• Errol puts on a short call spread in BIDU and goes long (buys) a PYPL put spread.

Errol wonders why volatility seems to be going down on a bullish day. Tom explains that the markets are scared of downside velocity--big sell offs--but when the market goes up, everybody gets complacent and starts buying again. Volatility expands on down moves and contracts on up moves.