Volatility Compression Footprints
This idea is a look at how the summer months compress volatility.
This volatility compression pattern also shares similarities to an ascending triangle.
Volatility compression over the summer months will result in increased VANNA and CHARM buybacks.
When volatility compresses for long enough a break breakout (short squeezes) occurs the same way an ascending triangle coils up and breaks out.
Key Points.
1. Low volume summer months leads to price and volatility compression.
2. Volatility compression creates delta buybacks referred to as VANNA and CHARM flows.
3. VANNA and CHARM flows trigger short squeezes.
4. Short squeezes are more common in low volume (low liquidity) summer months.
To help identify when Volatility compression is at its peak, use the monitor below.
When VIX6M-VIX9D spread is above 6 there is better higher risk to reward in long vol.
When the monitor is over 6 I begin accumulating PUTS on indexes and higher risk names that have squeezed and will be the first to have exposure dropped.
Thanks for Reading. Information provided is for educational purpose and not meant to be used as financial advice.
If this perspective interests you, please follow me SPYvsGME
This volatility compression pattern also shares similarities to an ascending triangle.
Volatility compression over the summer months will result in increased VANNA and CHARM buybacks.
When volatility compresses for long enough a break breakout (short squeezes) occurs the same way an ascending triangle coils up and breaks out.
Key Points.
1. Low volume summer months leads to price and volatility compression.
2. Volatility compression creates delta buybacks referred to as VANNA and CHARM flows.
3. VANNA and CHARM flows trigger short squeezes.
4. Short squeezes are more common in low volume (low liquidity) summer months.
To help identify when Volatility compression is at its peak, use the monitor below.
When VIX6M-VIX9D spread is above 6 there is better higher risk to reward in long vol.
When the monitor is over 6 I begin accumulating PUTS on indexes and higher risk names that have squeezed and will be the first to have exposure dropped.
Thanks for Reading. Information provided is for educational purpose and not meant to be used as financial advice.
If this perspective interests you, please follow me SPYvsGME
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.