There Are Other VIXs

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A few people were surprised that there was an ‘oil vix’ that follows volatility on USO and WTI (OVX and OIV respectively).  

What will surprise even more people is that there are MANY MANY more VIX indexes.  There are VIX indexes on almost every major ETF.

Today’s in Option Pit’s Group Mentoring, I found myself talking about VXXLE (the VIX of XLE).  

There are many more though, VXD (the VIX of the DJIA), EVZ (the VIX of the EUR/USD), and VXTLT are 3 VIX indexes that I have looked at in the past.

I have also spent time with VXAPL, which is the VIX of AAPL (there are VIX’s for AAPL,  AMAZON, GOOGLE, GS, and IBM).

People often ask me if they need crazy vol analytics to make trading decisions.  One of the nice things about having all of these VIX indexes is that I have analytics on many of the most popular names just by pulling up a regular old stock chart.

Using these indexes, especially for newer volatility traders can save you a lot of money early on, while learning to trade VIX products (incidentally, the VVIX is great for both VIX and VXX trading).

VIX Traffic light is Yellow,  but teetering on Red.

Peak oil vol might be over, the question now is  are we heading for a VIX collapse or a slow burn.

Your Only Option,

Mark

PS – The oil dislocation has created a real opportunity for VIX traders. We trade trade volatility because it never matters the instrument that is going crazy,  we can make money on it.  Join me…

Oil Volatility

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We may have reached peak oil volatility yesterday!

The June oil contract traded down about 50% in a day.  It was an algo driven bloodbath that pushed Oil lower and lower and lower.

Finally, the CME stepped in and restricted who could sell Oil.  It needed to happen because Oil probably deserves to be lower, but not the way it traded yesterday.  But much of the damage is done. 

OVX, the VIX of USO, traded over 500 closing 325 and OIV, VIX of WTI, over 1000 (and you thought 85 VIX was high).

When we say that Vol can go higher than you can imagine, this is what we mean.  NEVER underestimate the volatility of a broken market.

We think there is a spillover that needs to be figured out.  I would be wary of equities for the rest of the week, although I still like VIX NOT to break much above 50, if it breaks much higher at all.

We continue to like short vol short market.

VIX Traffic light is Yellow

Your Only Option,

Mark

PS – Crazy markets, in times of uncertainty, create crazy opportunities. People who stick with “buy and hope” are getting slaughtered. Even big sovereign wealth funds with all their modeling are getting into real trouble. This is why I trade volatility because it never matters the instrument or the “model.” Join me…

What is Going on in Oil?

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A huge turn in the market at the end of the day…because of oil.  The VIX blew up as the WTI May Oil contract was blowing up. I did not think this was possible, but WTI May traded for a CREDIT.  

We all made note of the VIX trading over 85 in March:

However, that is NOTHING compared to the Oil VIX (OIV) traded over 450!!!  Oil had a 1987 type event….TIMES 3!!!

I have never seen anything like this, nor will I ever see something like this again.  

When you ask,  ‘DO WE NEED A TRADING FLOOR?’

YES!!

I think this is definitive proof there is value.  THIS NEVER happens if WTI has a floor contract for rolling months.

There will be spillover from this, VIX is going to go higher.  I am studying this in detail right now, but holy cow, that this can happen, is scary.

The Option Pit Traffic Light is Yellow, but man is this something that needs to be digested. 

I would NOT be overconfident in markets here.

Your Only Option,

Mark

PS:  A spike in volatility is just around the corner. At these levels the intraday moves are still gonna be big. There’s only one way to prepare for those and that’s with my Vol Edge.  Get it HERE while you still can.

The Week Ahead

Vol Edge is killing it! As the world spins in confusion we are confidently trading our profits with the VIX. You can too! Grab my next big winner by tomorrow by  Clicking here.


The VIX closed 38 on Friday.  This was the lowest VIX level since March 4th.  Unlike some times where the VIX dropping can seem slow relative to the VIX rallying, the VIX has not collapsed, but had a steady drop:

However, I would state that its rate of drop has slowed.  Last week was a pretty darn strong week for the S&P 500, yet the VIX did not get completely face punched.  

On the week the S&P 500 gained 125 points, about 5%.  Normally, an extremely strong week. The VIX only lost 3 points on the week.  

What will this week bring?  I still feel like there is an increase in volatility coming one of these weeks.  Potentially this week. Not a giant pop like in March, but potentially a pop back above 45 or even 50 as we have a week where money comes out of the market.

I think we could see a period of time where volatility is muted, but the market is soft.  This is typically something that happens during these types of events.  

I would note that despite two strong weeks, the VIX is still backward, and realized volatility is still strong on some days and can come from nowhere.

I do not think ANYONE saw Friday’s end of day ramp coming, but it did.

VIX Traffic Light Remains Yellow

Your Only Option,

Mark

PS:  A spike in volatility is just around the corner. At these levels the intraday moves are still gonna be big. There’s only one way to prepare for those and that’s with my Vol Edge

Game Changer?

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The market has been looking for a game changer in the fight against Covid-19.  

I have been arguing that when we have a clear idea of when the US gets back to working, the market will find its reason to begin selling volatility and developing multiples that make sense.

Frankly, VIX is not going to drop until the amount of stay at home orders drop.  We may finally be at that point.

News out of Texas and Ohio is that they plan to turn on the economy on May 1.  THEN we got HUGE game changing news:

GILD has a drug that appears to work.  Patients treated with Remdesivir at a Chicago hospital showed REMARKABLE results.

This would mean that Remdesivir could be the ‘tamiflu’ of Coronavirus…the drug that dramatically reduces the effects of CV19 on patients.

If the data is true then Coronavirus DOES become the flu.  If CV19 has a similar profile in terms of infections as the Flu, the US is going to be back to work and firing on all cylinders by July.

So what does this mean for vol?  We could be on the cusp of a NASTY rally in markets, notably hotels and airlines.

VIX will drop, probably too fast.  

This means that, believe it or not, owning premium in a falling vol market will be the way to make money. 

I know it sounds counter-intuitive, but the trade will be a ‘short time spread’.  

This  means the trader will want to be long near dated calls against short longer dated calls.  Long gamma, short vega (sometimes kappa) will be the way to make the best dollars.

We will know more today, but this could be the game changer.

VIX Light:  Technically Yellow,  but I may trade it as if it is red tomorrow.

Your Only Options

Mark

PS:  We have been slammed on the amazing quarterly offer to my elite trading service Volatility Edge, and so now I am going to be shutting this amazing offer over the next few days.  Sign up here.

VIX & Technical Analysis

VIX UPDATE-Our Vol Edge members are shocked at the amount of traction and success we are having trading the VIX RIGHT NOW! If you want to join in on the next VIX trade. Click here.


I am not one for technical analysis.  I am even less one for technical analysis on the VIX.  TA just simply does not work on the VIX.

Long term, the VIX has an average, a mean.  Stocks and many other assets do NOT have a long term mean.

One might argue some other commodities do, and who knows, they might, but I dont care.  But not in the true sense of mean reversion that the VIX tends to hold too.

That said I know there are enough people watching the VIX, and levels of volatility, that some of the big moving averages can cause selling in the VIX, and almost certainly buying.

Take for instance the price action yesterday, VIX for the 1st time in about 2 months crossed BELOW its 50 day moving average.

After what seemed like endless momentum, the VIX found a bid, on a day the market was selling off no less.

VIX over the last two weeks had been selling off on red SPX days, and firm on SPX green days.

This could be a near term blip back higher for the VIX, perhaps to 50 or greater, that tends to be the pattern in major sell offs.

I still think at some point we will see a lower low than the current low, however VIX might not break 60 or even 55 in that process.  

When that happens I will be buying the market with both hands.  If I am early, it will not be by much. In the meantime I like selling implied volatility(IV) that is out of the money and longer dated.

Currently, I am looking at June or longer, with a delta around 20 or less.

Option Pit Traffic Light: Yellow – Which means VIX could go up or down.

Your Only Option

Mark

PS:   We are still putting out great trades in the Vol Edge, and there are more to come.  We are going to be ending our unique quarterly service offer in the next few days. With my amazing money back guarantee you might as well give it a try.  Sign up here.

Our Traffic Light

VIX UPDATE – I just spoke with my core group of new Vol Edge members. And they are shocked at the amount of traction and success we are having trading the VIX RIGHT NOW! If you want to join in on the next VIX trade. Click here.

I want to take a few minutes to describe how our traffic light works.  At Option Pit we use a Red Light, meaning sell, a Green Light meaning buy, and a Yellow light…which I will explain momentarily.


In the world of volatility, I want to remind you that things are upside down.  In times where the market is tanking we want to BUY volatility.


Thus a Green light on VIX happens when markets are selling off:  see Feb 2020:

Prior to that, up until the middle of February the traffic light was RED, meaning sell.  VIX spent most of its time in Red.  


It is red most of the time because of contango.
Now, let’s talk yellow.  Yellow on our traffic light does NOT mean ‘caution.’  It means ‘we do not know.’ We might have our suspicions, but they are NOT based on quantitative measures.


Think about it this way, today the VIX closed about 38.   The May VIX future is about 33.5.  


This time next week, I think they will be about the same or lower.  
However, I have extremely low confidence.
The VIX could just as easily be 45 if the market turns around.  VIX is dropping because the market is going up, not because volatility is necessarily ‘tanking.’


We moved over 3% yesterday, that is a 45 vol, above the current VIX.  The VIX curve is backward, meaning we are afraid of RIGHT NOW, more than the long term future.
Neither of those lend one to ANY confidence predicting the future.  Especially VIX futures. 
Thus a yellow light does not mean the market CAN’T go up, or the VIX down.  It means the confidence of our predictive outcome is low.

Thus…

The Option Pit VIX Traffic Light is:  YELLOW

Your Only Option,

Mark

Where to Now?

VIX UPDATE – I just spoke with my core group of new Vol Edge members. And they are shocked at the amount of traction and success we are having trading the VIX RIGHT NOW! If you want to join in on the next VIX trade. Click here.

The VIX settled at 43.35, the lowest level since March 6th, when the VIX closed 41.95

The question now is where to next.  The Index has clearly begun to flatten over the last couple days, after a total beat down last week.  What is fascinating is that while the market moves higher by 260 points, the VIX has basically spun its wheels.  

The index closed today, almost exactly at the low from Monday.  It is interesting that there seems to be so little VIX pain this week, after a total beat down last week.  

What is so odd is that not only is the market up, BUT WE ARE ALSO HEADING INTO A 3 DAY WEEKEND.

I look at what I see, the VIX market still firmly backward, EXCEPT when it comes to April futures.

If VIX can get below April, maybe May, we could see the 1st RED light in volatility, ie the VIX in a while.  This means VIX going down, regardless of the market, but it would help if realized volatility would tick DOWN instead of ticking up.  A 175 and 90 point day DO NOT HELP.

Option Pit Vol Traffic Light:  Yellow.

Your Only Option,

Mark

Controversial Trade Inside…[Hint: There’s Two!]

The VIX Edge

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Vol Summary

We ended the week with the SPX down about a touch over 50 points on the week.  About a 2% drop on the week.

Yet take a look at the price action of the VIX.  

Almost straight down.  Why? Well remember, the VIX is not the “which-way-is-the-market-going” gauge (that was a mouthful), it is the Fear Gauge.  It is derived from two major components:

  1. How much is the market moving right now
  2. How much MIGHT the SPX move in the future.

The pronounced drop in the VIX clearly comes from the fact that movement is SLOWING.  Realized volatility has dropped from daily moves well over 5%, to daily moves under 3%.  At Friday’s lows, down about 2.5%, the VIX fair value would be 40. Thus, unless we see a serious increase in movement again, VIX is unlikely to pop and more likely to drop. 

In addition, the drop likely means the market thinks that future movement is not going to pick back up to levels we saw recently.  

Does this mean we are at a bottom?  Not necessarily. Remember in 2008-2009 the top of the VIX and the bottom of the market were separated by 4 months.  However, that does likely mean that there could be some value in put selling to get into stocks.  

The bottom might not be in, but the top for VIX probably is.

Looking ahead

The Option Pit Traffic Light

 VIX/SPIKES light is BARELY yellow.

This is because the VIX curve is STILL backward despite the drop in vol

We think we are in a rare spot where the SPX and VIX could drop on the week.  We like a combo of SHORT S&P 500 and SHORT VIX futures.

Your Only Option,

Mark Sebastian

P.S. – Right now if you are seeing this message you are one of my highly valued members.

Every day I’m excited to get up and come work…FOR YOU!

Here’s the thing, as a trader we have to be straight up and to the point.

Get to the edge. Execute. Monitor and move on…

Over the last few weeks changes around here have been huge and I’ve been receiving massive requests for my direct time…to learn from a true master of volatility.

I’m working on something new and special. I’m gonna launch it after Easter. However, before that point I want you to have an exclusive chance at one on one mentoring with me.

Even the great Warren Buffett had a mentor with Benjamin Graham. I was thankful to have my mentor in this game and I want to be able to directly help expedite your learning curve.

This is all about Sharp B.E.T.S and Volatility Edge, but to the next level. 

Its so important to be able to up your game to that of true consistency and mastery and I wanna help get you there as quick as possible.

I literally only have 50 slots available due to the literal time in the day I have to meet with my mentees.

Be prepared for a special offer from me coming out tomorrow, because once I launch in Easter its going up and then its moving up to the retail price of over $15k…which even then is a steal…

Talk soon…

Market Up!…VIX Flat??

Vol Summary

While the market was strong, through most of the week,  volatility did little in terms of net movement, opening at 65.72 and closing 65.54 on the week.

What is interesting about the lack of movement is how much the S&P 500 was up on the week.  Normally when the S&P 500 picks up 240 points in a week, one would expect the VIX to be down.  

Here is the problem, the S&P 500 was not up 240 points in a week.  It was up over 400 points from Monday’s close to Thursday’s close. On Monday and Friday,  it was down 60 and 90 points respectively.

The point is, the rally this week was almost as unhealthy as the sell off the previous week bringing with it HUGE day to day movement.  Take a look at realized volatility over the last 20 trading days:

20 day realized volatility is 95%….95%  I am pretty certain this is the highest 20 day realized vol ever, certainly in the last 90 years.

The VIX curve remained pretty constant this week.  After April became oversold last week it made up for it by basically sitting still all week, although it was up on the week marginally.   May which was expensive relative to April normalized by sitting in place, doing nothing.

Looking Ahead

We think realized volatility almost has to come in this week.  95% simply is unsustainable. Now that we have gotten down to 2500, I expect sell offs to be softer than rallies, as there is some ‘fomo’  fear on rallies right now. Everyone wants to know ‘when to buy.’ Good news for us, we will know using our traffic light.

I am thinking this next presents a lower VIX and a choppy S&P 500.

The Traffic Light

The VIX Traffic Light is YELLOW.

This means there is little edge in buying OR selling VIX Futures or ETP’s.  

Your Only Option,

Mark Sebastian