VIX drops to another 30 day low

BY ANDREW GIOVINAZZI

May 12, 2024

Hey OP Crew,

AG’s alter-ego Vol Man here with my weekly analysis. As usual, I will start with my last forecast…

If some of my Option Volatility Jargon is vexing, our Glossary is here.

Last Week:

“This is a very light news week. I expect a little pullback in stocks once the news on the AAPL buyback is fully digested. Then rally mode starts again closing on 5150 and VIX trundling down to 13 or lower. The massive contango should weigh on all vol products so expect UVXY to finish lower on the week by $1.00.”

The little pullback was Tuesday for all of 30 min and SPX went straight to 5200, breezing past 5150 almost eclipsing all time highs. VIX trundled down to 12 and change while UVXY lost nearly 2 points. I was close but not perfect.

The big issue was light news as opposed to this week with a CPI and PPI number to get folks riled about inflation again. Stocks rally close to all time highs and VIX gets smoked? That’s what the market thinks about the number. Inflation will likely come in a little hot since most of the readings lately have and we are still near ATH.

SPX daily price action over the last 30 days

SPX is a day away from an all time high and we might hit it Monday. 5000 SPX might as well be 1 million miles away and those puts can be had for the lowest price of the year.

SPX sigma (Vol per term average) levels over the last 30 days.

Sigma Vols are crushed there is no other way to put it. The demand for 5000 strike protection and below has drawn to a halt. Look at the graph above and anyone can see the right hand side is not like the rest of the chart. I can feel the volatility evaporating.

The 10-day realized vol is up to 13.42 so about a 1 pt drop from last week. 30 Day realized vol is now above the VIX number. Even with the inflation numbers coming, traders are not bidding the IV like they did just 1 month ago.

SPX realized volatility snap on May 10 2024

OP VIX Zone Watch

VIX ZONE 1 9-13 we are here

VIX ZONE 2 13.01 TO 17.99 we were here

VIX ZONE 3 18-23.99

VIX ZONE 4 24<

The front end of the curve continued its drop into a normal contango with the curve almost in a normal VIX state for a bull market. Zone 1 is here and it has proved a sticky area to hold this year. This is still a bearish curve for VIX and strong downzone action.

Closing VIX curve, May 10 2024

VIX is nearly a full point lower than last week. VIX is also at lows of the year.

Closing VIX cash and curve, May 03, 2024

Basic Vol 101 on our Option Pit YouTube channel.

VIX 30 day chart with 1 min candles

We could see a pump in vol for Tuesday’s number. I don’t think it will hold with the massive selloff in VIX this last week and with short term IVs. Liquidity providers must own a ton of options to get vol this low this fast after just trading 16 two weeks ago. Earnings are out save for NVDA but this is not until the 22nd of May. That is a week plus hole in activity and it is clear traders do not want to buy protective options to hold that period. Crazy town 11 handle VIX this week with SPX 5250 in sight.

Weekly Profit Cycles is opening for a quarterly subscription if you want to learn to trade VIX/SPY exclusively. I am 11 for 12 for Opens in WPC. So getting paid to own SPY puts in an up market is something anyone can learn to do.

To Your Trading Success,

-AG