VIX is close to being undervalued: Cheap way to play it

[Maverick74]

Is TVIX going to zero? LOL. I own some of it at levels which I thought was "cheaper". It's certainly a lot cheaper now. Fortunately, it's only a small part of my total portfolio. But still scary watching it going down every day..

It's going down right in line with VX futures.

 

[El OchoCinco]

Does VIX know something the rest of the market doesn't know?

There's an odd disconnect between the fear index and the market

http://www.cnbc.com/2016/06/14/theres-an-odd-disconnect-between-the-fear-index-and-the-market.html

Question...doesn't a market bukkake usually come when the market is the most oblivious? However no bad news seems pending and we are in an election year..

market can remain irrationally low in vols a lot longer than you can....well you know the rest of the paraphrase... .

Certainly a market worth playing regular short vols with a long vol kicker.

 

[nitro]

Question...doesn't a market bukkake usually come when the market is the most oblivious? However no bad news seems pending and we are in an election year..

market can remain irrationally low in vols a lot longer than you can....well you know the rest of the paraphrase... .

Certainly a market worth playing regular short vols with a long vol kicker.

Sure. One can argue that in low interest rate environment, many markets will eventually be useless, case in point volatility as an asset class. Even Brexit is seen as a buying opportunity to put dead cash to use because this market is driven by liquidity than anything else. As Warren Buffet said, with rates at zero for extended periods of time, you can make an argument for DOW at 100,000 [USA use of comma]. Why on earth would anyone buy vol in that environment?

One can also argue that markets are mostly psychologically driven more than technically driven. But in ZIRP environment, that takes on a whole new meaning.

Volatility as an asset class is dead until markets move off ZIRP. Gold is being used as a replacement for vol not because of its [theorized] hedge against catastrophe, but as a hedge against multiple currency risk. That is also dangerous.

It is a lesson of a lifetime. Extraordinary levels of liquidity makes many markets, or more accurately, the reason they exist as a societal anchor to transact business and hedge risk, completely irrelevant.

 

[Deuteronomy_24_7]

You already missed the play. The correct play was to short volatility after the Brexit hysteria.

And I strongly recommend going back and buying the S&P 500 in March, 2009 !

 

[newwurldmn]

Sure. One can argue that in low interest rate environment, many markets will eventually be useless, case in point volatility as an asset class. Even Brexit is seen as a buying opportunity to put dead cash to use because this market is driven by liquidity than anything else. As Warren Buffet said, with rates at zero for extended periods of time, you can make an argument for DOW at 100,000 [USA use of comma]. Why on earth would anyone buy vol in that environment?

One can argue that markets are mostly psychologically driven more than technically driven. But in ZIRP environment, that takes on a whole new meaning.

Volatility as an asset class is dead until markets move off ZIRP. Gold is being used as a replacement for vol not because of its [theorized] hedge against catastrophe, but as a hedge against multiple currency risk. That is also dangerous.

It is a lesson of a lifetime. Extraordinary levels of liquidity makes many markets, or more accurately, the reason they exist as a societal anchor to transact business and hedge risk, completely irrelevant.

You could have said the same story in 2006. Liquidity then caused vol to be very low.

 

[nitro]

You could have said the same story in 2006. Liquidity then caused vol to be very low.

To a certain extent that is true. But my god man, nearly a decade straight years of ZIRP dwarfs anything that has even been seen, except maybe in 1930s.

If your point is that we are in the cycle where vol doesn't matter, but it is darkest before dawn, maybe. But in the meantime, it's more of the same.

 

[Victory5]

It's going down right in line with VX futures.

Exactly. And they're trading (at least over the past few weeks) with a massive premium to the spot and the fact that contango between the front months is so high you are likely to see similar price activity in front month futures for the foreseeable future.

 

[newwurldmn]

To a certain extent that is true. But my god man, nearly a decade straight years of ZIRP dwarfs anything that has even been seen, except maybe in 1930s.

If your point is that we are in the cycle where vol doesn't matter, but it is darkest before dawn, maybe. But in the meantime, it's more of the same.

I am just saying that there is a high correlation between liquidity in the markets and volatility.

Today it's ZIRP. Before it was borrowing. In the end someone has capital and is putting it in the markets muting selloffs and creating an orderly upward trend.

 

[wildchild]

And I strongly recommend going back and buying the S&P 500 in March, 2009 !

I am missing your point.

 

[sellindexvol66]

Sure. One can argue that in low interest rate environment, many markets will eventually be useless, case in point volatility as an asset class. Even Brexit is seen as a buying opportunity to put dead cash to use because this market is driven by liquidity than anything else. As Warren Buffet said, with rates at zero for extended periods of time, you can make an argument for DOW at 100,000 [USA use of comma]. Why on earth would anyone buy vol in that environment?

One can also argue that markets are mostly psychologically driven more than technically driven. But in ZIRP environment, that takes on a whole new meaning.

Volatility as an asset class is dead until markets move off ZIRP. Gold is being used as a replacement for vol not because of its [theorized] hedge against catastrophe, but as a hedge against multiple currency risk. That is also dangerous.

It is a lesson of a lifetime. Extraordinary levels of liquidity makes many markets, or more accurately, the reason they exist as a societal anchor to transact business and hedge risk, completely irrelevant.

I guess nitro has come a long way from posting nuclear explosion pictures regrading the future market direction. Of course the market went straight up from there and the thread ultimately went to chit chat.

Now volatility is dead? Lol.....I think it's time to fade you yet again!