How did the VIX jump to 27 from 15 in a day ?

BY ANDREW GIOVINAZZI

December 19, 2024

Yo Pit Crazies,

Well I thought in yesterday’s OP Newsletter that VIX and IV in SPX would be lower by Friday. As of right now, that does not look too good. Note below that there is a “good” area most of the day where VIX was dropping from Tuesday and the “Not” area where VIX spiked a bunch going into the close. I have remarked this week that IV was sneaking up but after the Wednesday selloff maybe traders were looking for a selloff.

For those that are going to check out the Zero Theta Situation this week, this selloff could not have happened at a better time. The low IV in individual names all got a boost today from the selloff in stocks. The point Mark was making is that this volatility can move and it was too low going into the FOMC.

5 day VIX chart

So how does the VIX go from 15.15 to 27+ in 2 hours?

If you click here, you will learn how and why and how it will help you for the month of January.

VIX measures 30 day option prices

That VIX of 27 corresponds to a SPDR S&P 500 ETF (Ticker: SPY) Straddle value, the long call and long put at the money, in the Jan17 cycle for SPY of $25.00. SPY moved $18 today in 1 day so VIX jumping to $27 is very reasonable.

VIX at 27 is equivalent to SPY straddle in Jan17 of $25 for the next 30 days.

Now yesterday:

VIX for 15.60 was equivalent to a SPY straddle in Jan17 of $16.5.

So right now if I am betting on a VIX decline, I am also betting on the daily range of SPY to drop. I think that is likely to happen. It was a good day in Weekly Profits Cycle as I closed all my SPY put spreads, 5 courses, and am setting up now for the downside in VIX into Jan.

I expect this to be a great VIX selling opportunity by the end of the January cycle.

To Your Trading Success,