Major VIX Action Suggests Volatility Is Going To Decline - PowerPoint PPT Presentation

Loading...

PPT – Major VIX Action Suggests Volatility Is Going To Decline PowerPoint presentation | free to download - id: 7b692f-MTMxN



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Major VIX Action Suggests Volatility Is Going To Decline

Description:

A large VIX trade suggests volatility is going to settle down before September expiration. – PowerPoint PPT presentation

Number of Views:12

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Major VIX Action Suggests Volatility Is Going To Decline


1
  • OPTIONS TRADING RESEARCH

Major VIX Action Suggests Volatility Is Going To
Decline
2
Welcome to Options Trading Research Your premier
site for news and information on Profitable
Options Trading. For more info on Options Trading
visit our website www.OptionsTradingResearch.com
3
  • Get Your Free Report On Options Trading Success!
  • Well tell you about this
  • Special Offer
  • at the end of the video!

4
  • Hi, My name is Steve and Im with Options Trading
    Research, today were reviewing our recently
    published article

5
  • Major VIX Action Suggests Volatility Is Going To
    Decline

6
  • The VIX has been front and center in the
    financial news lately with all the volatility
    thats hit the market the past couple weeks.

7
  • The collapse of the Chinese economy is spooking
    investors and adding a sizeable level of
    uncertainty to US financial markets.

8
  • As a reminder, the VIX (SP 500 Volatility Index)
    is a measure of implied volatility levels on SP
    500 options. As many of you know, the VIX is
    often considered the markets fear gauge.

9
  • Overall market volatility is most commonly
    tracked by watching the VIX. For those who are
    interested in learning more about the VIX, the
    CBOE VIX mini-site has a ton of valuable
    information on the index. Follow the link if you
    want to learn more.

10
  • With all the action in the markets lately,
    theres been renewed interest in volatility or
    volatility products. Its true for options
    traders of course.

11
  • But, even those traders who never touch options
    may still trade (or at least follow) volatility
    levels. Ive written a lot about volatility in
    the past, and you check out this article to learn
    more about why volatility is important.

12
  • With that being said, lets take a look at
    interesting VIX action form this week. It could
    give us some clues as to what to expect from the
    market over the next few weeks.
  • Heres the deal

13
  • A major VIX put spread hit the tape this week
    expiring in September. More specifically, a
    trader purchased the September 19 puts and sold
    the 14.50 puts at the same time for a total
    premium cost of 0.29.

14
  • The spread was done 45,000 times, making the
    total cost of the trade 1.3 million. The max
    profit for the trade is realized if the VIX
    closes at 14.50 or below on September expiration.

15
  • That would be actual profits of almost 19
    million in the best-case scenario!

16
  • Okay, so whats the story with this VIX trade?
  • Heres the chart of the VIX

17
(No Transcript)
18
  • The VIX is still trading well above the 50-day
    moving average after spiking in mid-August.
    While the benchmark volatility index is off its
    highs, its still trading at elevated levels
    compared to where its been for most of the year.

19
  • The trader behind the large September spread is
    obviously betting the VIX is going to come back
    to earth sooner rather than later. If the VIX
    falls to the 50-day moving average, the price
    will be right in the middle of the spreads
    profit range.

20
  • So, given the recent history, how likely is it
    this VIX spread will be a winner?

21
  • Given how fast the VIX can move, theres reason
    to believe the trader will make money on this
    spread. While I dont expect the VIX to go back
    to 14.50 in the next roughly three weeks, falling
    under 19 is a definite possibility.

22
  • Doing a put spread like this where youre betting
    on mean reversion in volatility is generally a
    good idea. While theres still uncertainty in
    the markets, the VIX does tend to revert to its
    mean faster than most equities and indexes.

23
  • All in all, it looks like a smart trade.

24
  • Want More from Options Trading Research.com?
  • Follow us on Social Media

25
  • Want more FREE information on Options Trading?
  • OptionsTradingResearch.com

Get Your FREE Report Now
26
READ THIS FREE REPORT!
3 New Easy Rules for Options Trading Success!
CLICK HERE
About PowerShow.com