BY ANDREW GIOVINAZZI 

September 7, 2023 

Yo Pit Crazies,

This is a constant subject in our Pro Room and throughout many of the pods I teach – how low can VIX go? The answer this year is around 13%.

I haven’t seen sustained VIX numbers below 12 for a few years now. Single digit vol was around 2017 and 2018, so it has been a very long time. From my recollection, it’s around once a decade.  

The Maginot Line was a famous defensive perimeter that the Germans skirted in WWII.  Instead of going through it, they went around it. That’s the issue with VIX – you can get to it, but it’s rough going through it. 

Fortunately VIX doesn’t trade the cash.

And that’s where the fun is.

VIX Options Trade Off of the VIX Futures

While I’m not getting into the whole Forward Vol thing here, this does open a lot of opportunities for trading bounce and inflections because the futures move to the VIX cash index over time.

The VIX line was just 13, so with a 15.20 future price that leaves the 15 puts relatively cheap under $1.00. As a matter of fact, the VIX Sep20 15 put and 17 call was $1.30 yesterday:

Work the cause and effect there. If the recent market tribulations are for naught, $1.30 for the strangle is darn cheap since the 15 puts could be worth $2.00. If the selloff gets worse, the 17 calls will explode. I think there will be opportunities to close that position next week, possibly this week.

To Your Trading Success,

AG