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VIX trade ideas

Is Volatility Incorrectly Priced?SPY is down over 20% and the VIX is at ~27!! Extremely low in relation to current market conditions. Based on the Fed’s recent economic projection , unemployment is set to rise 0.6% in 2023!!! In turn a drop of PCE inflation from 5.4% to 2.8% is projected. Implicating a US recession and a possible global recession. Pivoting Powell is donning the Volker mask and risk assets are not safe… The VIX has been making higher lows since June 2021 but is extremely low for the level of uncertainty in the market and it is currently incorrectly priced. As a recession inches closer, market sentiment will degrade and the VIX may explore its upside potential. In markets, volatility is measured in expected terms because participants speculate on future market conditions. Measures of volatility use option pricing as inputs. As volatility increases, option prices increase. Options prices are based on time duration (how long until the option expires) and price variation (how far the strike is from the current price). By aggregating this data, volatility models are able to encompass the markets expectation of price variation (volatility) in the underlying asset. VIX: The most common measures of Volatility is the VIX. This index is a forward looking indicator of volatility that indicates the level of uncertainty in the SPX marketplace. In more technical terms: VIX measures 30 day expected Volatility of the SPX futures market. The VIX uses SPX Option prices because SPX Options reflect the market’s expectations of future volatility. (SPX Options Puts/Calls are more expensive when volatility is higher). SPX options reflect the amount investors are willing to pay for options (put or call) indicating the expected movement in SPX. The VIX Index (also known as the sigma index) is represented as an annualized 1-standard deviation measure of return on SP500. With SPX at $400 and the VIX at 27. There is a 68% chance (1std), SPX will be -/+ 27% one year later. Calculations can also be made for the market’s expectation: for 1 month: 27/sqrt(12months)= +/- 7.8% expected move, one month later: , 1 week: 27/sqrt(52weeks)= +/- 3.7% expected move, one week later: and 1 day: 27/sqrt(256tradingdays)= +/- 1.7% expected move, one day later. As the VIX rises the future value of SPX becomes more uncertain. For context, in March 2020 the VIX reached a +/- 80% expected move in the SPX. When VIX options are incorrectly priced in relation to market conditions both bulls and bears can profit by utilizing options. Bulls can buy options on their bullish stocks instead of purchasing shares out-right because even if the underlying asset price doesn’t increase much; their option appreciates with volatility. Bears will find their put options appreciate with the increase in Volatility while, the underlying asset price falls as well. VVIX: Just as the VIX is calculated by using SPX options as inputs. The VVIX is calculated by using VIX options. VVIX is a measure of the change of volatility in the VIX volatility index and in particular focuses on the magnitude of SPX Volatility. When VIX is high, that means option prices of the SPX is high, which means investors want to sell premium on the VIX. (If options are expensive, there is incentive to sell options). The VVIX can be used to better understand the VIX. When VIX and VVIX are low, strategies that benefit off increased volatility (ex. Debit call spread) will benefit. VVIX is rate variable and reverts to the mean of around 70-90. VVIX just came down from 160 in January 2022 and now is at 90. Even though this is an average level, volatility should be more elevated in the midst of a tightening cycle. SKEW: SKEW measures the Slope of Implied Volatility which is probability that the one-month S&P 500 log-return falls two or three standard deviations below the mean. When SKEW is equal to 100, the distribution of S&P 500 log-returns is normal, and the probability of returns two standard devations below or above the mean is 4.6% (2.3% on each side); the probability decreases to .3% (.15% on each side) for three standard deviations. For every five point move in the SKEW index adds or subtracts around 1.3 or 1.4 percentage points to the risk of a two-standard deviation move. Unlike the VIX, the SKEW index looks at implied volatility of SPX Out of The Money (OTM) puts. Skew tells us that calls are expensive and puts are cheap. Skew is a measure of the relationship of OTM puts to OTM calls. SKEW is known as being the indicator of a BlackSwan Event. As demand of OTM puts rise, SKEW rises. SKEW looks prime for an upward move and the VIX will likely join.
TVC:VIX
by arama-nuggetrouble
14
VIX - Volatility about to creep back in the marketIn tandem with our bearish assessment of the stock market, we predict the return of increased volatility in the market. As a result, we would like to set a medium-term price target for VIX at 30 USD. Illustration 1.01 Illustration 1.01 shows the weekly chart of VIX. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
TVC:VIXLong
by Tradersweekly
29
VIX - Back to the elevated volatilityOn 3rd August 2022, we set a medium-term price target for VIX at 30 USD. Then a week later, we updated this price target to short-term. Our view derives from the premise that the stock market ceased its bear market rally and will continue to drift lower. Technical indicators indicate intense selling pressure across major U.S. stock market indices over the short term. At the same time, bearish fundamental factors are due to persist for much longer, over the medium and long term. These factors will drive the global economy into a deeper recession toward the end of the year, causing a risk-off sentiment accompanied by elevated volatility. Therefore, we have no reason to change our assessment. Accordingly, we stick to the 30 USD price target. Illustration 1.01 The picture shows a bullish breakout above the sloping resistance, shortly followed by an opening gap. These developments are very bullish for VIX. Illustration 1.02 Illustration 1.02 shows the top of the bear market rally and correlation among U.S. stock market indices. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
TVC:VIXLong
by Tradersweekly
19
VIX - Volatility is skyrocketingIn early August 2022, we warned that volatility would creep back into the market. Not long enough after that, the market started to sell off, and VIX skyrocketed from 20 USD to over 27 USD. Therefore, we stick to our short-term price target of 30 USD for VIX. However, we want to set a new medium-term price target at 35 USD. Illustration 1.01 The chart shows a bullish breakout above the resistance and two opening gaps on VIX. All of these developments are immensely bullish for VIX. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
TVC:VIXLong
by Tradersweekly
26
VIX - The market weakness will lead to higher volatility The market volatility is on the rise, with VIX rising over 30% since 12th August 2022. We continue to be bullish on the index as we forecast more pain for the stock market. Our view is based upon fundamental factors. Because of that, we will pay close attention to the upcoming FED meeting. Accordingly, we maintain a short-term price target for VIX at 30 USD and a medium-term price target at 35 USD. Illustration 1.01 Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
TVC:VIXLong
by Tradersweekly
10
VIX - LongWe continue to be bearish on the general stock market and, therefore, bullish on the VIX. Accordingly, we stick to our short-term price target of 30 USD and a medium-term price target of 35 USD. We will pay close attention to the FED meeting on Wednesday as we expect the volatility index to rise further after the meeting. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
TVC:VIXLong
by Tradersweekly
19
VIX - 2007-2008 pattern?Have been analysing all VIX recoveries after big drops and 90% of them were the same - a curve to the downsidefor some time until a rounded bottom appeared and pumped the value sky-high crossing the long-term curve. This time it is different. We recovered from last big drop (Covid Crash) the same way as always - but we didn't pump as we used to - and this has happened just once before - 2007-2008. The top rounded to the downside and the bottom acted like breaking down (bullish for stocks) creating an illusion of a bull market. The rest happened as you can see - the it bounced down again but creating a higher low, which was an indication of willing to go up and break the rounded top. This time we have the same exact situation, but we are missing one more leg down. Will we repeat that same behaviour just before the crash? Meaning a last stock/risk-on assets pump before falling ? Stay safe.
TVC:VIX
by TheSecretsOfTrading
1
Impending VIX Breakout?An inverse head and shoulders has been accumulating below the 28 region and looks ready to breakout. VIX has been playing within the 28 to 26 pocket for almost a month. It began being below the 200ma and now VIX is above the 200ma on the 4HR. Keep in mind, on the daily chart we are still up trending . We have not reversed back down but have instead retested the 28 region numerous times. Will we breakout or be rejected? Tomorrow, be ready for fireworks. The entire market looks like it can go either way. Both VIX and SPY look ready to either rip or die. Be vigilant and lets make millions.
TVC:VIX
by MoRafi
VIX Volatility Forecast 19-24 Sep 2022VIX Volatility Forecast 19-24 Sep 2022 The current implied volatility is +- 3.26$ from the current opening of the weekly candle, 27.7$ With this in mind, we have a 65% chance that the market is going to stay within the range: TOP: 30.91 BOT: 24.46 At the same time, we can see that the average weekly candle, is around 11.5% From the technical analysis POV, we can see that our asset is above EMA 50/100/200. So currently I believe we are going to go towards 30$ level
TVC:VIXLong
by exlux
VIX whats next?Vix did what we expected - it bounced up respecting the curvy channel and is now dancing at the top. CPI came out a bit better, but that is no relief in thinking the bear market is gone. We didn't even hit the expected progress in this subject, therefore I remain bearish long term. I expect VIX to respect the curve here and try and retest lows (red line more likely), but if we cross the channel - we will go as the green line shows - meaning brutal bear market reality. Keep safe either way, cause all ways lead in 1 direction at the end.
TVC:VIXShort
by TheSecretsOfTrading
What happens when an unstoppable force meets an immovable objectStock Markets get wrecked… In this analogy, JHEQX is the unstoppable force and Vix is the immovable object. This idea is in response to a question a reader asked me, what exactly are JHEQX Flows. Where do they come from? What do they Mean? I will describe it as one of my mentors does, Cem Karsan. Everyone is long the stock market. If you enjoy life, driving cars, buying a home, eating out you are long the markets. It’s why stonks go up. But they do occasionally need to be corrected. Sometimes more than others. So some wicked smhart (read in a Boston accent) people came up with the idea for insurance on equities. Derivatives were born and have continued to grow now to the point where Derivatives of equities are the market, not the other way around. Otherwise known as Options, these insurance contracts are often bought to protect underlying assets to lower risk and guarantee a steady return on investment. The same thing that made Bernie Madoff a prisoner To do these, hedge funds need to buy the insurance product from a Market Maker (or Dealer). In 2008, that was companies like AIG who the government bailed out in a 15 years of monetary policy. The point is, the dealers who sell these insurance contracts need to be insulated from the risk of selling these products or end up like AIG. So the dealers hedge. As to not fall behind the curve on a downturn or rally, the dealer hedging is dynamically done. Dealers dynamically hedge their positions by buying and selling the underlying equities in the S&P 500 like APPL and TSLA. It’s why you see such violent buying and selling after news is released. These dealers need to constantly hedge. But what about regularly during normal trading hours and no news. To answer that, you need to understand there is more than price to the stock markets. With derivatives as the main driving factor in markets today, Time and Volatility play a major role in what the markets should be priced at any given time. There are affectionately coined VANNA and CHARM. VANNA is the change in delta of options in relation to Volatility. CHARM is the change in delta of options in relation to Time. In Summary As Volatility goes up/down Vanna Flows become stronger/weaker. As Time passes, CHARM flows get stronger until expiry. Flows meaning the buying and selling of delta (underlying S&P 500 equities) done by Dealers. Remember, dealers are always dynamically hedging deltas to remain risk neutral (or end up like AIG) Does that mean I can dodge bullets? No, What I’m saying is, when the time comes, you won’t have to. ——— Back to this idea. I mapped out the past 3 quarters of JHEQX and when it goes positive or negative gamma. You can clearly see a trend forming. I noticed it when VIX would not exceed 27.50 over the past few weeks (yellow triangles) Now I have a good looking trend of where the 2 forces will meet again and possible be “the crash” everyone is expecting. The FEDs policy stance has indicated increasing tougher times ahead. More hikes for longer until inflation is under control. This means VIX will continue to go up. It will also help us determine where JHEQX will roll over. The tricky part of the rollover will be that the gamma position is reset. That’s why you see the fund rarely flip except during its weakest flows after a reset. The rest puts positive and negative gamma smack dab in the middle of the price were the hedge is priced in that day. To see this, check this idea out and take note of where the product rolls over and where the yellow line that separates negative and positive gamma are. Now you see, it’s not so easy to flip this force negative or positive. Because it’s currently positive gamma, it provides the supportive flows like you have been seeing in markets the past few week. I suspect it will continue to provide support until 1 of 2 things happens: 1. Selling pressure is to much and drops the markets down to 3700. The CHARM effects are going to be the strongest in 9 days. 2. Rollover occurs at the end of the month and the markets drop. But what about the amount of gamma that rolled off on Fridays quad witching? A lot of gamma rolled off the markets on Friday leaving supportive flows like JHEQX to carry the markets through the next rate hike later this week and to the end of the month when the product resets. Please heed my warning. These flows are not a guarantee. In either direction. If an event happens, i.e. Russia backing out of the war, or China starting their own over Taiwan there is a catalyst for a large move event up or down. I don’t recommend trading off any of my views. Eventually the house always wins. Trade safe. Trade wicked Smhart.
TVC:VIX
by SPYvsGME
4