VIX in the Zone 4 always means something big

BY ANDREW GIOVINAZZI

August 8, 2024

Yo Pit Crazies,

On Wednesday, the Barclays Ipath Series B Short Term VIX ETN (Ticker: VXX) dropped $10 only to close near unchanged on the day. The VXX trade day is coming so check out what Mark said about VXX and how it works here.

Mark and Licia Leslie bringing home the bacon for traders on short term trades in the Option Pit room, especially the Trading Desk. Mark had a 10x put trade in the S&P 500 mini index (Ticker: XSP)

The reason he can look at a trade like that is because he understands what a 23 VIX means which is what VIX was this am. When he gave the audible to the room the VIX selloff that had been steady all day started to evaporate.

1 day VIX chart

I had to make some adjustments too!

VIX has an inverse correlation to SPX

VIX moves inversely to SPX up to 80% of the time. When Mark say the VIX selloff fade he got the idea that the 1.62% rally in SPX was on its way out. That fact it gave up the whole rally and then went red on the day is nuts.

In Trading Desk, I bought some VIX call spreads because I ran a tight stop on them. I had some VIX puts leaning on VIX dropping below 20 by September. Sep expiration is a long way away. Today the market had a 2.5% range or 40% volatility. It was no surprise the VIX closed flat for the day.

VIX did get into Zone 3, for about 1 hr,then back into Zone 4 or the highest quartile for VIX. I won’t buy any more VIX puts until we close in Zone 3 for at least one day and the VIX curve goes dead flat.

As for today I will put out offers for VIX call spreads and call butterflies and see what happens.

Mark explains contango and backwardation and a flat VIX curve in his VXX video.

To Your Trading Success,