Volatility is dead, Long Live Volatility

Volatility is dead, Long Live Volatility

With yet another ugly open as the USA weighs big tariffs on China, I noticed two things.  The selloff HERE was tepid and Chinese stocks did not do well.  If you follow the $FXI, it was down over 1.25% in a week that saw little happiness for that ETF.  $VIX is making a week low of the week as I write this.

There has been a lot of ink spilled on $VXX keeping a tight range lately and I am wondering if this will be the one that finally breaks the 12 level in $VIX for the month of August.  The tug of war in strong economy over Trade War is going in the “strong economy” direction.  The one-two punch of weak social media earnings  and the Trade Wars could only produce a 15 handle in the Aug future.  That is not enough when AAPL is a Trillion Dollar market cap (see yesterday’s post).

VIX Charts from Cboe LiveVol

What that leaves us with is if we can get a 13 handle or lower in the Aug future that will hold enough to produce some downside in VXX or a VIX put.  I do like the VIX Aug22 puts for 1.10 or less if one can get them.  There are several hedging opportunities if VIX can get to the 11s to produce real money on the trade.

There are a variety of ways to hedge VIX puts in contango with a nice, positive expected value.  You can learn about that in our Vol Newsletter or our Daily Chat Room.  I think QQQ will make new highs, on the back of AAPL and a realization that social media is not all tech.  if Trade Wars #4 can’t sink stocks, nothing can for now.

I like the VIX Aug22 14 puts to pay this cycle.

Follow Mark@optionpit

Follow Andrew@optionvol

Positions in $ VIX, $SPX, $QQQ, $FXI, $AAPL, $VXX

Leave A Response

* Denotes Required Field