Tag Archives: VIX

Another Huge VIX Bet

Richy RichBloomberg reported today (here) a $5 Million VIX bet – 40,000 April calls with the VIX at 15.5 – this follows the $6 Million spread I saw in November  (here).

Things are getting interesting.

The trader purchased 40,000 April calls on the VIX with a strike price of 22 for $1.28 each, according to Trade Alert LLC. The bullish volatility bet was the biggest single block of options to change hands on U.S. exchanges, the research firm said. The VIX rose 0.8 percent to 15.54 today.

Investors are positioning for a possible jump in volatility with stocks poised for the biggest annual advance since 2003 after the Federal Reserve refrained from reducing monthly bond purchases. The central bank may begin reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll.

“Customers continue to hedge their stock-market risk by buying upside calls in the VIX,” Mark Caffray, who brokers contracts on the index for clients at Chicago-based PTR Inc., said in an interview. “There have been very aggressive customer buyers of VIX calls in March 23, April 24, and today April 22 call strikes,” he said. “We do not expect this activity to subside until a Fed decision on tapering.”

An explanation from ZH which also suits this trade; “everyone remembers the summer very vividly, the last thing anyone wants is to be the last Kool-aid drinker at the centrally-planned party.”

Using the VIX for Trade Entry Signals

With the popularity of the VIX and VIX futures being overly used as a volatility hedge, I’ve been thinking about the signals it might give for medium term entry or exit points. If you chart the VIX and overlay Bollinger Bands (20,2,SMA) and look at the SPX, you’ll notice something interesting. Remember the VIX is forward-looking. The other indicators are price biased, and historical.

When the VIX breaks over the upper Bollinger band, you’ll see a low point directional change in the SPX. This isn’t a completely new idea, I was at a seminar recently which looked at combining this with Chandelier as a trading strategy. I’m going to just stick with the Bollinger Bands, the VIX and ATR. That’s where I see the most interesting information.

I mention ATR (Average True Range) because the 1 day ATR helps confirm long entry points.

Everything is in the chart below. The long signals look better than the short signals.

VIX SPX Bollinger

Good Trading.

The Divergences Screaming, Hello?!

Rambling about nothing is better than proclaiming some truth based on limited information.

And as we know, we know very little when it comes to predicting market moves. Just this morning, for example, terrible numbers hit the tape and the S&P continues oozing skyward. Good is Good, Bad is Good, the Fed is Good, indefference is even good. Until it isn’t.

So I thought I’d ramble about a few divergences which have me perplexed.

The first jumped out at me yesterday while the VIX was climbing on momentum WITH the S&P. Technically that happens but it was screaming  “look at me” yesterday. Options in general and puts in particular were getting bid up while the market was climbing. Fear of a rising market?


The second has been obvious all year, but it’s worth thinking about. The Gold Story – some would call it the Apple Story…

If you take the premise that gold is a hedge against inflation, gold isn’t worried, atleast paper gold isn’t. That surprises me, because there’s another argument: easy money from the central bank leads to inflation. This argument seems on firmer footing, every central bank in the world is printing. Yet it’s the divergence which has me looking for a trade.

ES GC Divergence

Here are some other good divergences, credit/macro/vix/10yr, labeled ‘just plain silly‘ from ZH.


S&P Futures Chart

SPY S&P Futures – Just Part of the Churn?

S&P Futures ChartWatching the schizophrenic twitter kids, you’d think we’re falling off a cliff today. Maybe today’s the day, but it’s been the same for about 2 weeks now. Risk-on, Risk-off – day in, day out. The momentum looks extra convincing today, or does it? The S&P futures chart is unique in my trading memory. It looks to have doubled-up in volatility, yet look at the VIX, we’re at 13, and holding lows, hardly panic. Option players are counting on the Fed’s steady bond buying. Even Gold is playing along with its consisitent downtrend. No worries, right?

My humble opinion is that the VIX is undervalued here, the 10 year bond has been churning as well, but easing upward. In fact, maybe Bitcoin has just taken over from the VIX as a more appropriate fear index! Parabolic…

If the VIX is undervalued, check out some long straddle’s here, the only caveat is that if this churn continues you’ll get burned, adjust quickly…

CAC40 Divergence

Is Cyprus Risk Being Under Rated?

It’s Thursday evening and we’ve been watching the drama in Cyprus play out for nearly 1 week. There are 2 camps, debating Cyprus risk:

  • “Cyprus’ represents only a small proportion of the EU, throw them under the bus, no big deal, let’s get on with the bull market.”
  • And the, “this is just the tip of the iceberg, one domino ahead of reigniting Greece, Italy, and Spain, buy gold” camp.


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Sleeping Bear

Pre-Market Indicators August 16th, 2012

Sleeping BearGood Morning NY,

  • EURUSD (1.2314) + 0.19%
  • Gold Futures (GC) passing up 1600 ($1606.80) + 0.17%
  • Oil Futures(CL) + 0.53%
  • S&P Futures (ES)  + 0.25%
  • CAC40 + 0.06% 
  • FTSE  0.23%
  • Asia: (NKD) + 1.58%
  • Corn Futures (ZC) + 0.54%
  • VIX Yesterday’s Close 14.63, + .09%
Road Trip

Pre-Market Indicators August 15th, 2012

Road Trip

flickr – LShadrack

Good Morning NY,

  • EURUSD (1.2285)  0.32%
  • Gold Futures (GC) giving up 1600 ($1594.20)  0.36%
  • Oil Futures(CL)  0.33%
  • S&P Futures (ES)   0.20%
  • CAC40 – 0.36% 
  • FTSE  0.19%
  • Asia: (NKD)  0.28%
  • Corn Futures (ZC) + 0.67%
  • VIX Closing 14.85, + 8.39%

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