$VVIX moves to a 6 month high

$VVIX moves to a 6 month high

$VVIX is moving to 6 month highs and could move to 12 month highs.  In order for it to do that we would need Volpocalypse 2 to unfold before our very eyes.  With XIV and SVXY not running for the exits anymore this 1 week doubling of $VIX has been very orderly.  I digress, you want to know what $VVIX is?  It is the $VIX of $VIX or the 30 day volatility in the $VIX options.

How does $VVIX move?

All of this $VIX stuff sounds confusing but it really is not.  Volatility in $VIX options is a great thing to watch as a trader because it gives lots of information.  Remember that $VIX has two layers of volatility, the decaying futures and the decaying options.  Think of it two sets of mattresses on top of each other.  In order to feel anything underneath the mattresses the move has to be pretty big.  When traders think the move is going to be big they buy $VIX options since the bang for the buck is good once volatility gets rolling.

In our Volatility Newsletter we owned VIX Oct strangles (closed a bit early) and Nov strangles (still have some of those) because $VVIX was cheap.  We buy the strangles a bit funky but for the most part it worked.  Once $VVIX starts to move higher, that is usually a good sign realized volatility in $SPX is going to pick up and we went from below 6% realized to 40%+ realized in a week.  Note in the chart below the first candle in $VVIX last week.  Something was afoot and it is still playing out today.

Charts by Livevol from Cboe

When does $VIX really move?

I think of volatility for the broader market in three’s.  We need 3 things to send VIX to 20.  The fact that $QQQ stocks are booking record earnings means little when bigger macro issues hit the tape. There has been China Trade, Rates and now Chinese Stimulus in the world’s most dynamic economy.  That 3rd item last Friday seems to be the straw the broke the camel’s back.  There might be a halt to the drama as Trump meets Xi at the end of November.  I would need to see $VVIX to come back for the all clear sign.

If still holding VXX calls from Monday’s blog, dump some.  If still holding VIX call hedges from Tuesday blog dump some of those too.  We got a lower $VVIX close today so it seems right to lighten up.

If you want to learn about this stuff, take our VIX Made Easy or VXX Made Easy course.  There is nothing like it out there and we give you your money back if don’t love it.   $1.97 on one contract is not much for a life changing options course.

Disclosure: $VIX, $VXX, $SPY, $SPX positions in the Karman Line family of volatility funds.

Check me out at Andrew@optionvol

Check Cramer’s BEST VIX guy at Mark@optionpit

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