The $VIX is never going down, ever again, ever.

The $VIX is never going down, ever again, ever.

The $VIX is not going down and it never will go down.  Ok I am lying, it will go down at some point but something has to happen first.  Instead of spilling the answer I will take a walk down memory lane to a quieter more peaceful time say all of 2017.  We all can remember the 9 $VIX and how that was common place, how the $VXX would drop like a rock and all of the other goodies that go with a very low cash volatility environment.  As it appears, it was a historically low realized volatility environment.

Like all things in options there was a reason.  My old mentor back in 1989 would say, “If you can’t figure out the answer with options, you are asking the wrong question.” So there was a reason $VIX was so low last year and that was… SPX/SPY did not move a whole lot.  The 14 day ATR top, average true range over 14 days, in 2017 was the lower than the low 14 day ATR for 2018 so far.  Think about that.  Why won’t that $VIX break 12 and stay there?  The reason is stocks are moving too much.

Charts by Tradier/Tradehawk  of14 DAY ATR for the $SPY

As you can see from my chart I am a technical whiz.  MS Paint and I can draw the heck out of a trend line but we might, just might, break into newer, lower realized volatility because we are starting to go there.   We can’t have lower $VIX until we have lower average volatility and smaller ranges.  Option Pit has this webinar series coming up, Options Made Easy, and evaluating trade potential is a big part of that class.  So according to the chart above, VIX will probably bounce here or find some new volatility lows for the year.  I am hoping to get a trade up for my Volatility Newsletter tomorrow to play such a thing.

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