For those that are flabbergasted that the VIX is now below 15, ?let me explain to you in one chart when the VIX has fallen out of bed. ?
Take a look at realized volatility in the SPX over the last 10 days:
With market volatility itself crashing it makes sense for the VIX to fall off. ?Looking ahead there is a FED meeting at the end of the that could cause the VIX to increase a touch, but we doubt it somewhat. ?While its likely that we are entering a new period of volatility, ?with market movement increasing cyclically, ?there will still be lulls like this. ?Things might be slow till Thanksgiving the way things are going.
The Lesson
Realized and implied are highly correlated…especially in indexes.
The Trade:
We like short VXX and UVXY, ?we also like upside 1 by 2 call spreads in SPX
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.?
For more information about Option Pit and their mentoring program, visit their website.