Cramer calling for a big bear raid & selloff on the fed announcement, and you calling for the opposite... I can't fade you both! I'm so confused now!
Kudos to MMs
- Thread starter nitro
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Looks like Cramer is RIGHT!
Did Jim Cramer actually just totally nail a market direction prediction????
This makes no sense at all. Today must be bizzaro day.
This makes no sense at all. Today must be bizzaro day.
How do you figure? Front month VIX futures are trading 17.50. This implies a 1.10% daily move. The 20 day historical on SPX is around 1.20%. VIX futures are trading at 10bps under stat. No dude, they are right in line. If anything, VIX might be a little rich here. September VIX is around 19. I have no clue why you think VIX is a free play on index movement at these levels.
Everyone uses a slightly different model to compute the IV. I should have been more clear. My own computation shows a slightly mispriced VIX. However, you are correct, the traditional way it is correctly giving changes in SPX.
Also, I use the Variance Swap, not the VIX futures for my computation.
The reality is that markets trade often 1 to 1.5 standard deviation from where they should. That equates to about $1 to $1.5 Trillion dollars. So if your FV models says 1542, add 1.5 standard deviation and keep size small and hit hard at 1.5 stddev from FV. Size should go up at 3 std, and it should be max size at > 5 stddev. Crashes can wipe you out on the downside [the crash of 1987 was a 20 stdev event!!! The Flash Crash was a 10 stddev event] so have to skew downside risk.
That is the lesson I have learned over 30 years. Trade small size all you want, wait to hit hard or accumulate a decent position only at substantial stddev from FV.
So many people make calls. The calls should be stated in relation to the position size they are taking. That tells you their actual conviction. People tend to size based on volatility but that is only half the right equation imo.
That is the lesson I have learned over 30 years. Trade small size all you want, wait to hit hard or accumulate a decent position only at substantial stddev from FV.
So many people make calls. The calls should be stated in relation to the position size they are taking. That tells you their actual conviction. People tend to size based on volatility but that is only half the right equation imo.