A few days a go we asked ‘where is the vol?‘ ?Upon further study, we found it. ?Its very subtle, ?but it is there, bubbling benieth the surface. ?Since Christmas, the S&P has rallied….slightly. ?At the same time, the VIX has slowly been rallying, hitting higher lows and higher height with each move. ?Take a look at the chart:
Livevol (r)?www.livevol.com
Despite the low VIX, it is not as low as it has been in the last few months. ?At the same time, the S&P has rallied. ?When the S&P is trending higher and the VIX is trending higher, it points toward something bigger than what we saw at the beginning of the year.
The Trade:
There is a strong chance that things will go from slow to explosive. ?At Option Pit, we like owning premium vol via longer term straddles, and paying for it via near term trades. ?Calendar spreads and ratio backspread also make sense.
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