$SPY intraday volatility is very high

$SPY intraday volatility is very high

Today $SPY intraday implied volatility jumped to a 5 day high.  How do I know this?  I have the full life of watching volatility all day long from my roost in Maine.   Mark Longo from the OptionsInsider Radio Network quaintly refers to it as Duchy of Maine.  From this vantage point I just look at the numbers and see what I can divine and what trade would work best given the conditions.  For now very few trade ideas work that are not long gamma.  The problem is how to pay for it.

Charts by LivevolPro from Cboe.

What is Volatility Fatigue?

We do have a VIX future’s condition that I call “vol fatigue”.  That is where the $VIX is super-high, Zone 4 for me is above $24 VIX, and the near term $VIX futures just gyrate and gravitate upwards.  There is no real blowout. It is an area where $VXX puts get clobbered and $VIX call flies slowly grind higher.  That is the key since almost all the volatility complex, $VXX, $UVXY, $SVXY and $VIX, just slow roll to the next level.  The Vol Products are sort of moving but the $SPX is really moving intraday.  We are waiting for the Big Crush in volatility that has yet to come.

Does the Election Matter?

The one thing on the calendar that has not moved is the election.  The market in a sense has been giddy over the current White House and is now having second thoughts.  Trade Wars, Interest Rates and a new Congress are freaking everyone out.  Even better trade news today could not keep the bear at bay.  We have had basically 10 days of up vol and VIX is only up 5 points.  Volatility grinds higher and that is the key really.  That is how the market is trading.

The Short End of the Curve

The very short end of the term structure is the best place to operate.  That is where we can trade the intraday volatility without getting stuck owning the longer term volatility.  We posted a trade like that in our Volatility Newsletter that had positive gamma and positive theta for a 1 – 2 day hold.  If you take our Saturday Class this weekend, we will teach you how to identify the condition, structure a trade and manage to conclusion on the very short end of the curve.  My guess is that tomorrow will look a lot like today.


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