VolatilityAnalytics.com

  • About the Volatility Analytics Newsletter
  • Contact
  • VIX 101

VIX Surges to Highest Level of 2013

Posted by Scott Murray on June 20, 2013
Posted in: Uncategorized. Tagged: Options, VIX, Volatility, VXX.

Now you know why June is the 2nd worst month for the Dow. By the way, sell in May was entirely accurate. How many pundits said that sell in May didn’t work this year. It did in fact work to perfection. The biggest key to selling in May this year was when you sold. It doesn’t have to be on April 30th. But even if you did, the S&P fell below that level today.

Volatility is at the highs of the year. On December 28th, it was roughly 22, and before that you have to go back to June of last year to see a higher VIX. The 50 day moving average was broken like it didn’t exist, and as the day wore on puts were in very high demand. Take a look at this chart:

cpc620

Clearly, this is an extreme level and generally coincides with the lows in the S&P. This is where you buy VXX puts. IMO, it does not get much easier. Sure we could have 5% or more to the downside, but at this rate, that will be here by Monday.  I legged into July 5th $22 puts for an average of 1.22. If the market opens lower, and the VXX is higher, I will add, potentially farther out in time.

The futures are slightly backwardated and many traders believe that this means more downside for the S&P, although this happened recently and it reversed itself in very short order. Spot VIX is higher than July as well.

Symbol Contract Month Time Last Change Open High Low
VX N3-CF S&P 500 VOLATILITY July2013 16:41:18 19.65 2.04 18.05 20.25 18.00
VX Q3-CF S&P 500 VOLATILITY August2013 16:41:18 19.45 1.08 18.70 20.35 18.60
VX U3-CF S&P 500 VOLATILITY September2013 16:41:19 20.05 0.98 19.30 20.65 19.20

The VXX puts are better than buying index options, because the market does not need to move much higher for volatility to come out. That being said, the VIX is higher than July futures, so the VXX will probably not fall as fast.

Riskier but potentially more profitable trades can be made in next week’s puts. Frequently the first week of the opex cycle shows the lowest volatility and is when the VXX gets hit hard. But, keep in mind that spot is higher than the futures, so the VXX can certainly go higher from here.

Posts navigation

← VIX and VXX Fall as S&P Sheds 23 points
VIX Closes 10% Off Day’s High →
  • Subscribe to the VA Newsletter – $30/mo

  • Follow us on Twitter

    Follow @VolatilityWiz
  • RSS Volatility Analytics RSS Feed

    • Volatility Analytics Newsletter Samples
  • Recent Posts

    • Volatility Analytics Newsletter Samples
    • Summer Volatility – Will it Vanish?
    • Creative Volatility Trading (Part 1) – Calendar Ratio Spreads
    • Trading Volatility in a Low Vol Market
    • How Much Short-Term Downside is Left in VXX and UVXY?
  • Archives

    • May 2021
    • May 2018
    • May 2017
    • April 2017
    • November 2015
    • August 2014
    • May 2014
    • March 2014
    • November 2013
    • October 2013
    • September 2013
    • August 2013
    • July 2013
    • June 2013
    • May 2013
    • April 2013
    • March 2013
    • February 2013
    • January 2013
    • December 2012
    • November 2012
  • RSS VIX and More Blog

    • The Latest on VXX and Additional Creation Unit Suspensions by Barclays
    • SPX Weekly Options Will Soon Be Available with Expirations Every Day of the Week
    • UVXY Dominates VIX ETPs By Dollar-Weighted Volume
  • Categories

    • Uncategorized
Proudly powered by WordPress Theme: Parament by Automattic.