The VIX had a nice recovery yesterday?on what was really a mild sell off.
Traders have short memories, ?but not that short. ?The VIX had a nice recovery yesterday?on what was really a mild sell off. ?Down 13 bucks is only about .7%. ?The VIX though popped up 1.5% back over 17. ?This means the market thinks there is still good odds for a lot more 1% daily moves plus. ?I would note that the curve is still in contango. ?What’s interesting, maybe even more than VIX itself was the huge move in VVIX. ?The VVIX popped 10% to nearly 100 again.
It appears that VIX got low enough, and VIX futures got low enough that traders wanted to buy upside calls in VIX agian. ?Volume was also heavy at over 1.2 million contracts. ?The biggest trade being the Nov 30/40 call sporead.
The Lesson: ?when lewels get cheap enough traders will buy options in just about anything, including VIX
The Trade: ?This may be a chance to fade vol premium again. ?With VIX futures in contango and VIX above 17,…and VVIX near 100 VIX options look a little ripe.
Mark Sebastian is a former member of both the Chicago Board Options Exchange and the American Stock Exchange. The Author of the ?popular trading manual “The Option Traders Hedge fund.” ?He is a ?frequent guest on CNBC, Fox Business News, Bloomberg, First Business News. ?Sebastian has been published nationally on Yahoo Finance, quoted in the Wall Street Journal, Reuters, and Bloomberg and is an ?all-star contributor? for TheStreet.com?s Option Profits Team. ?Mark has spoken for The Options Industry Council, the CBOE, the ISE, The CME, ?and is a co-host on the popular Option Block Podcast ?and Volatility Views podcast.?
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