12 is the stickiest number for VIX

BY ANDREW GIOVINAZZI

May 14, 2024

Yo Pit Crazies,

Look for our latest deal on the Trading Desk. I am doing the Vol Masterclass every week to give students a jolt of the good stuff. Learn how to trade volatility or it will teach you the hard way.

Speaking of volatility note the chart of the S&P 500 Trust ETF (Ticker: SPY). That is a pretty flat day for SPY. Down about .20 on the day.

Note below the chart for the SPY May17 term, or sigma volatility. That did not have a flat day. Short term May 17 IV ripped 4 points!!!

30 Day SPY chart with sigma volatility on the bottom

I went and showed my students in the Trading Desk that the decay went in reverse. Yes, decay can go in reverse.

Now how in the heck does it do that?

When implied volatility goes up, decay goes in reverse

I am teaching my students how to understand time and volatility in the Trading Desk. The liquidity provider can cheat time by moving IV up or down. Right now they put the weekend back into the options on Monday getting ready for a big pop in SPY post-PPI today.

They made time go in reverse by raising the volatility in the option prices. They can do that when they want. I used to do it for 15 years so I have a little idea what I am talking about. Selling the straddle, call and put, for this week was lower since the LPs simply pumped the prices back up.

The big question will be if the IV remains in the options through the next number, the CPI tomorrow. Most of the moves in 2024 have been upside surprises. Stocks have rallied solidly in the face of most of the poor news so the bigger question is around Nvidia Corp (Ticker: NVDA). AI hope springs eternal.

Why a 12 VIX in the headline? 12 is the mode volatility for VIX and the handle it spends the most time in. If the PPI/CPI come in line, that is where we are headed.

To Your Trading Success,

-AG