The Story Behind Light Vol Volume

VIX trading volumes were extremely light on Wednesday.

On a day where the VIX is over 22, we should be seeing worried hedgers and/or traders playing to fade the volatility index.

We saw neither.

The VIX has picked up over the last week, spending four of the last seven trading days over 20:

Yet, VIX option volumes continue to decline.

Usually when the index is flying  around, we see traders scurrying to position themselves.

We should be seeing hedgers betting on VIX going to 80 …

And faders betting on VIX going to 15 …

We are not seeing that.

VVIX, the VIX of VIX, did not get a crazy pop on Tuesday, and basically did nothing on Wednesday …

Why are traders ignoring VIX?

The answer is that the VIX has been trading in WAY too tight of a range.

Hedgers are not buying that the VIX is going to run to 30 again.

And faders are sick of getting fooled …

VIX keeps threatening to break below 15, only to fail:

If the VIX doesn’t make a decision, it is going to become irrelevant.

EVERYONE knows that it is overpriced … but it STAYS overpriced!

Until the VIX falls back in line, traders might be choosing to ignore it and move on.

What does this create?


With the VIX high and VVIX pretty reasonable, we can play a small fade in ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) and then get out …

That said, when VIX gets back to 13 — which it will —  watch for trading volume to explode.

Your Only Option,

Mark Sebastian

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.