You Must Learn to Trade the Low-Vol Market

Andrew Giovinazzi

Yo, Pit Crazies,

Mark “The SeaBass” Sebastian rocked The Trading Desk last night.

Why do I call him Seabass? That was his handle when he was a CBOE market maker.

You know, sort of like “Maverick” or “Ice Man.”

You can join The Trading Desk and learn a thing or two about trading vol from him. (You get me too!) An interesting wrinkle? Mark has identified a generational profit opportunity that he says will not only make traders’ years, it will make careers …

In fact, he’s so confident in this massive event that if it doesn’t happen within the next six months, he’ll give new members another six months of the service at no charge.

Shifting gears …

I often talk about VIX Zones. But why do I care so much about them?

Well, they give me the market flavor. Is it hot or cold? Lukewarm or sizzling hot? (The Trading Desk specializes in using the VIX Zones to set up trades, by the way.)

VIX has a long history going back to when it was a “twinkle-in-the-eye” vol index for the S&P 100 stock index (Ticker: OEX) back in the 80s and 90s. All we can do is use old time & sales data to calculate it from back then. The crash in 1987 was the highest measure of VIX until 33 years later in 2020

Below is the five-day VIX chart. It stayed in Zone 2 the whole week:

VIX 5 Day chart with 1 min candles

That matters.

VIX has 4 quartiles

The VIX has 4 Zones. Now the Crash in 87 and the Covid Crisis ranks as the biggest VIX events I can remember. Both are in Zone 4 or all VIX samples above 24. The Zone Breakdown is as follows:

Zone 1, 9-12: Smooth Sailing for SPX
Zone 2, 13-17: Getting A Little Squirrely for SPX
Zone 3, 18-23: High Anxiety for SPX
Zone 4, 24+: Danger Zone for SPX.

Russell Rhoads, Dr. VIX and a great follow on Twitter, recently tweeted this confirming my VIX zone observations:

We can call the over 31 the Crazy Zone, but most of the time VIX does not stay above 31. That is the nature of VIX. It moves and then it stops and drops. Right now, I see us as 17 VIX and VIX spends around 50% of its time there.

My tip: It is hard for VIX to “change” zones. That means something new needs to happen. After all the tumult of 2022, it’s hard to imagine what is new for 2023 but it can happen. Trade what you see, hedge for what you don’t.

And join the Trading Desk to learn how to trade the VIX zones.

To Your Trading Success,