Tuesday was another rally day in the S&P 500, and the term structure looks something like this:
On its face, the term structure is just the sigmas of the SPX implied volatilities per term.
Note this week is 15.59. That is as low as it has gotten in a while.
But there is a missing piece.
What is it?
If you want a taste of the Option Pit Mentoring Power Keys that we’ll reveal live Thursday night …
Read on!
SPX Term Structure with the VIX Curve Is a Power Key
The short term sigmas – that’s the implied vol per term – is hovering just around 15%.
Put that into context of the 30-day futures and the Sept. VIX contract is 23.30.
So, the one-month IV is still sky-high relative to the short term IV.
The last time I saw the VIX future premium this high was the killer rally after Softbank loaded up on Big Tech calls.
Stocks sold off afterward but the rally was pretty sharp first.
It would appear the rally has some legs.
THE LESSON: BIG future premium in VIX is a tell the short end of vol is very low and selling into that low area could lead to a world of hurt.
The Rundown
Vol Edge
Mark closed some 2x Long VIX Future ETF (Ticker: UVIX) Aug19 12 puts for a 143%
gain.
Big Money Shopper
The Mark and Licia duet is in harmony with Clarus Corp (Ticker: CLAR) Sep16 25 calls closed for a 92% gain. Massive call buying in that name still.
To Your Trading Success,
AG