Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

VIX Had a Red Friday


Futures traders seem to consider this a blip that will fade.

We interrupt the 2008 Volatility Melt to bring you a special Volatility Explosion.

Remember the old "10% Rule" in the VIX? When the VIX is 10% below the 10-day moving average, it's considered oversold and bearish for the market, and therefore 10% above the 10-day moving average is considered overbought and bullish.

Well, amazingly, by this loose definition, the VIX traversed from (almost) oversold to (barely) overbought in one session. Let me put that in caps for emphasis: IN ONE SESSION. That's really rough to do, I mean you need a greater than 20% lift and you need it to start at oversold.

Friday's usually lead to volatility sell-offs, with the notable exception being when everyone is more afraid of a news disaster than a few days of weekend decay. This is clearly one of those times.

Who's not really afraid? VIX futures traders.

Decembers closed at a 0.75 discount, meaning that $2 premium evaporated overnight -- and then some.

So you have a real mixed picture here. On one hand, options traders apparently didn't want to head off for the weekend without some put protection, which is quite bullish. On the other hand, futures traders seem to consider this a blip that will fade like the Giants' playoff chances.

Personally I think the futures have it right, so I made some options and put spread sales on Friday. I left room for more as these things can linger a few days, so I'll go from there.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos