The COVID Vol Event Is Over!

Andrew Giovinazzi

Yo Pit Crazies,

Most people like doing what they are comfortable with. Investors are the same way.

Fads and fashion in stocks aren’t a whole lot different than clothes. What’s good this season is dead the next.

Remember the commodity squeeze last year?

Oil stocks are going nowhere in 2023. Tech in 2022 was dead as a doornail as valuations came back to earth.

I’ve seen Tech rally, and shorting it right now is a fools game. I closed some calls in Netflix Inc (Ticker: NFLX) for a nice win in Easy Button and I’m already regretting it. This new generation of traders has not seen low vol and knows tech is a sure thing. That’s a powerful brew at low volatility.

NFLX 3 month chart with 1 day candles

What is a sure thing is that the COVID vol event after 3 years is over.

How do I know?

Trading Volatility Is More About Lows Than Highs

As they say on Twitter, that’s the Tweet.

If you want to get good at trading vol, see how low it can go, because tomorrow you never know how high it can go. From experience – 30 years and counting – once a volatility makes a new local low, the initial vol event is over.

COVID was a 3 year vol event. All bets are off how low VIX goes now.

What helps vol go lower? Stocks going higher.

It is tempting to short SPX now with the big rally, but low vol tells me otherwise. Animal spirits for growth stocks ditto. This is the perfect recipe for the Easy Button and a vol centric product like Trading Desk.

Just because you haven’t seen a 12 VIX doesn’t mean it can’t get there.