If one were to look back at the last 20 days of trading and compare it to the previous 10 years, one would be looking at just about the least movement over that 20 day period over the last 10 years. ?In fact it would be one of the slowest periods ever. ?Once yesterday is included in the number, ?expect realized volatility which in TD has measured around at 3.4% and in Livevol at around 5.4% to drop to about 3.25% and near 5%, respectively. ?Regardless of the HV measurement, ?both would have to be considered just about the lowest measured level in the last 10 years. ?The only period that comes close was around January of 2010. ?Take a look at how things have fallen off:
LivevolX (r)?www.livevol.com
The sad thing is, that this might be the beginning or the end, we just don’t know. ?What we do know is that the VIX is extremely overpriced at 11% and that the VIX futures, which are the forward value of the VIX are probably even more overpriced.
The Trade:
As shocking as it might be, ?VIX options, ?VIX ETP”s and VIX futures are all probably huge sales right here. ?If I was looking for protection I MIGHT look at this week’s VXST options which are based on the SPX contract that has non-farms in them. ?Another option might be next week’s SPX options, although honestly I would only hold as a hedge because gamma is so high right now (remember low vol, low theta, high gamma for Options).
Disclosure: Long Puts in UVXY
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