Vix Under 20.00

What is interesting is that the calulation on the VIX will be changing soon.

I believe pro option traders rarely trade VIX just based on the number, but where the number is in relation to it's historical values.

I believe the only other time VIX was lower than the current value of twenty since they have been tracking it was back in '94 when the market went nowhere for a year.

I went to the McMillan talk at the Chicago Expo and learned some interesting strategies to trade low and high volatility. If this stuff works and I understood what he was saying, now is the time to be "buying volatilty" cheap.

nitro
 
A low vix does not signal a top. The vix can stay low for many months and even years. However a low vix often means its not a great long term entry point. But often a low vix is a GREAT SHORT TERM entry point. As long as the vix is low expect more of the same. I.E. very little danger holding stocks overnight. More risk being short overnight than long.

Do not make the mistake of thinking that a low vix signals danger.

A danger sign would be if the Vix began to break out of its current range. I.E. A move over 25. The day the VIX moves above 25 i will be crazy short the mkt.
 
When I see a thread like this, I always just shake my head and think to myself "so these are the people on the other side of my trade". Sometimes you just make it TOOOOO easy. Good luck with your "VIX below 20= a top" theory.
 
Quote from Arnie:

When I see a thread like this, I always just shake my head and think to myself "so these are the people on the other side of my trade". Sometimes you just make it TOOOOO easy. Good luck with your "VIX below 20= a top" theory.
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The market looks like an overstuffed hog to me. Seeing such arrogance in your post leads me to wonder if this could one of those rare 10% of the time when your side of the trade gets slaughtered.

best of luck
 
Quote from Arnie:

When I see a thread like this, I always just shake my head and think to myself "so these are the people on the other side of my trade". Sometimes you just make it TOOOOO easy. Good luck with your "VIX below 20= a top" theory.
More...
No offense Arnie, but this always makes me laugh. As if you are really trading against someone.

Say I enter the market short at 70. The market tanks and I cover at 60. I buy my shares from you to cover. But you are selling shares to me that you bought at 50. We both are flat and +10.

Point being, you have no idea what the agenda is for the other side of your trade. But I guess if it makes you feel better there is no harm done, except when you post insulting comments.
 
Quote from silk:

A low vix does not signal a top. The vix can stay low for many months and even years. However a low vix often means its not a great long term entry point. But often a low vix is a GREAT SHORT TERM entry point. As long as the vix is low expect more of the same. I.E. very little danger holding stocks overnight. More risk being short overnight than long.

Do not make the mistake of thinking that a low vix signals danger.

A danger sign would be if the Vix began to break out of its current range. I.E. A move over 25. The day the VIX moves above 25 i will be crazy short the mkt.
More...

Very good point Silk. This is a great signal and helps confirm entry just after the top rather than before the top is made or confirmed. Thanks.
 
Be careful with the strategy. Just be aware that an indicator based on options is can give "false" signals. In particular, since VIX is based on the implied volatilities of near-the-money options in the nearest months, it becomes more volatile as options expiration days approach. This can lead to highly dynamic readings that have nothing to do with the market fear/complacency itself. For example, on June 21 2002 the VIX was at approximately 33. On the day after expiration, it dropped to approximately 29.00. Notice that in your case, this may result in a possible jump from 20 to 25 with a possible dip back below, with little or no "meaning."

I have not done a detail study of VIX as it nears options expiration, but I do have an indicator that I use that is, IMHO, measuring the "correct" value and is "immune" to the expiration anomaly.

nitro
Quote from silk:

A low vix does not signal a top. The vix can stay low for many months and even years. However a low vix often means its not a great long term entry point. But often a low vix is a GREAT SHORT TERM entry point. As long as the vix is low expect more of the same. I.E. very little danger holding stocks overnight. More risk being short overnight than long.

Do not make the mistake of thinking that a low vix signals danger.

A danger sign would be if the Vix began to break out of its current range. I.E. A move over 25. The day the VIX moves above 25 i will be crazy short the mkt.
More...
 
Quote from nitro:

Be careful with the strategy. Just be aware that an indicator based on options is can give "false" signals. In particular, since VIX is based on the implied volatilities of near-the-money options in the nearest months, it becomes more volatile as options expiration days approach. This can lead to highly dynamic readings that have nothing to do with the market fear/complacency itself. For example, on June 21 2002 the VIX was at approximately 33. On the day after expiration, it dropped to approximately 29.00. Notice that in your case, this may result in a possible jump from 20 to 25 with a possible dip back below, with little or no "meaning."

I have not done a detail study of VIX as it nears options expiration, but I do have an indicator that I use that is, IMHO, measuring the "correct" value and is "immune" to the expiration anomaly.

nitro
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Interesting Nitro. If you don't mind, what is the indicator that you humbly believe sees through through this phenomenon?
 
Yes, Nitro is correct in his assertion that the VIX can be heavily influenced by how many trading days are in the option cycle, especially as one comes near expiration.

Check out this week's Barron's and the Strike Price column.

With all of the chatter about the VIX recently, they decided to ask some "experts" about how it has been behaving, and what it may, or may not be indicating . . . Most people agree that VIX cannot be used alone and that other technical tools such as sentiment, NYSE member shorting, Put/Call ratios, etc. must be used in conjunction with the VIX.

The article points out that many of the put/call ratios on teh CBOE for equity, as well as index options are at extremes as well.
 
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