There a major chink in the VIX armor developed based on the relationship between VIX and SPX. For once VIX sold off harder than SPX rallied.

Taking a quick look at premium bought and premium sold in SPX, it is clear that while the SPX was up yesterday, the premium buyers were out in force.

Trade selection using volatility as the primary criteria. Different trades for different volatility opportunities.

European leaders will now meet twice, first on Sunday and then again Wednesday, in an effort to find a comprehensive strategy to solve the debt crisis that began in Greece.

The SPX rallied more than it sold off Monday, and yet, the VIX barely budged, falling less than 2%. On a strike-to-strike basis SPX IV was up.

Trade selection using volatility as the primary criteria. Different trades for different volatility opportunities.

Just as the markets were starting to hear about the outline of a credible debt-restructuring plan for the Eurozone, news began leaking that Germany wants a 50% to 60% write down of the debt held by the private banks after they had previously agreed to a 21% haircut on their Greek debt holdings.

Yesterday, for a brief moment a few interesting things happend:

Take a look at where the VIX is currently trading 32.80, right at the low end of the range of the index since the market blew up almost 3 months ago:

As I stated in yesterday's post, I traded a contract on SPXpm, and I noticed a couple of things.

One of the results of 'volatility exhaustion' is that we may see two things:

While reporters will be talking about the VIX topping out above 45% and the SPX breaking 1100 for the first time in 2011, those in the know do not seem to be too impressed by what was going on yesterday.