Volatility totally changed its mind this week.

BY ANDREW GIOVINAZZI

August 19, 2024

Yo Pit Crazies,

If you want to learn about decay and how to make it work for you, click here.

Mark and I launched our SVIX strategy this week in the Trading Desk with a host of other new goodies to get traders to take advantage of the changing conditions in the market. If you take a look below, volatility can do crazy things but it does move in a wave. Since I spent some time in my youth trying to surf, never got any good at it and only stood up once, the wave analogies are still with me. Now in my middle age I am trying to regain it but using a giant paddle board so there is hope.

There is also hope to learn to ride the Volatility Curve.

30 day VIX curve

Sometimes the wave is slow roller

Sometimes the wave is a shore pounding monster

The point to all this is there is a wave to ride, you just have to understand how to ride it. After all, volatility is one of the 3 moving parts with options in addition to underlying price and time.

It is time to go for a ride.

Right now we are on the down slope for volatility

Will we always be on the downslope of volatility? Nope at some point the wave will break and start to re-crest and then move to another cycle. Mark and I came up with a plan for this in our new SVIX strategy.

The key to trading volatility is to ride the part of the wave we are on, not the part of the wave we think we should be, and ride it to the crest or trough. Surfing is easier when you drop in and not pitch over the top. Most of The Trading Desk will be learning and trading around the volatility curve.

I expect a quieter week for volatility, but that does not mean we won’t see performance out of the short vol products.

If you want to learn about decay and how to make it work for you, click here.

To Your Trading Success,