VIX Chart 6mo

VIX – SPY Straddle Time

The VIX has been keeping my attention over the last week or two. This is a 6 month chart of the VIX it shows a range of 18-47 and we’re therefore sitting at the low end.

This might reflect a market “reality”, but as I think about reversion to the mean (see this), I’m going to work on the thesis that we’ll soon see higher volatility. Even with a longer perspective (1 year) the $VIX is still ‘low’, in May 2011 the VIX bottomed at 14.50.

Admittedly repetitive European summits, election politics in the US, and FED-ECB printing, assured low interest rates, are working to hold the $VIX where it is.  On the other hand Europe is likely to still hold some surprises, what worries me the most, are the upcoming European bond auctions. Any one of these auctions could spook the markets.

(All € bln) Italy Spain Greece Portugal Ireland Belgium France Germany
January €15.6 €9.2 €4.0 €4.0 €0 €7.4 €49.5 €34.0
February €53.1 €14.7 €2.3 €4.0 €0 €7.2 €37.2 €9.0
March €44.2 €17.5 €17.5 €2.8 €5.5 €10.4 €33.7 €28.0
Total €112.9 €41.4 €23.8 €10.8 €5.5 €25.0 €120.4 €71.0

I’m considering today’s 20.63 relatively low and looking for appropriate option strategies.

In this case a +2/3 month Straddle is worth considering.

More later. Good Trading.