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VIX CBOE Volatility Index

Prey in Sight, 6 Apr 2023🖼 Daily Technical Picture 📈 ➤ S&P500 has found it's footing once again at the minor support level at the 6 March high after threatening to fall off the edge. It was a clear case of risk-off mode today with DJIA blue chips supported and NASDAQ, RUSSELL 2000 sold-off. Still, there wasn't really much damage done to the bullish narrative. ➤ A lot is happening in other asset classes. Gold has broken out big time, USD is threatening weaken to new lows, Oil rebounded aggressively and NATGAS continues to fall apart. All this you can see in my previous posts. Oh yes, don't forget about bond prices too. I should take a good look at the charts there too. With all this commotion, equities is relatively calm. It probably won't be that way for long. ➤ With the current price action, I'm getting a clearer picture. I have the prey in my sight. Now I just need to find the right timing to pounce. ➤ Conclusion: Hunt is on. EQUITY TREND: ⦿ Short-term (weeks) - NEUTRAL ⦿ Medium-term (< 6 months) - UP ⦿ Long-term (>6 months) - DOWN
AMEX:SPY
by mrstockyetoro
1
Big Picture: S&P 500 (SPY) Over a Simple Risk/RewardI like to follow the course of 'risk appetite' but there are many definitions of sentiment from the perception of confidence in a particular asset up to an assessment of the entire financial system as a whole. I like the top down approach in this case as much of what happens in individual assets on a regular basis roles up to an industry/region/asset class or the broader financial system. For me, gauging 'risk appetite' answers much of the market activity currently unfolding in the market. For measures of market-wide sentiment, I have made very simple to very complicated. This is very simple. Going by the standard 'risk/reward' perspective: a singular (but imperfect) 'risk' measure is the $VIX and a similar 'reward' metric is the US 10-year yield. Of course, there are many issues with the VIX and it is derived from US markets (S&P 500 specifically). However, the US equity index is one fo the most ubiquitous gauges of investor activity in the world. As for the US 10-year, there is certainly better yielding assets, but most of it is based on a 'prime-plus' and this benchmark is treated as the prime. All that said, this risk/reward gauge seems to have just recently rounded off as the rate regime starts to taper off and volatility start to stir. Longer-term relationship has skewed - a sign of equities ($SPY S&P 500 here) inflating over time and the lack of return in a traditional portfolio one makes in zero rate environments. You can rise the SPY wave or FAANG or meme stocks or crypto to try and get greater return; but it invites ever greater risk relative to the expected returns. Are there any other good 'risk/reward' measures that are both indicative of the global market and simple?
AMEX:SPY
by JohnKicklighter
Close Call, 5 Apr 2023🖼 Daily Technical Picture 📈 ➤ Equities reversed course on Tuesday trade, however two aspects remain unchanged: 1) Nasdaq outperformed Russell 2000 2) Late buying into the close. ➤ Without that late buying, I would have taken a small short position to test out the waters, jumping straight back into the action. It was a close call. As it is, I will have wait to see how tomorrow's price action unfolds. The price action will dictate the potential directional trade I will take. Although a short position is favoured, it could also just as easily trigger a buy/long position too! Price could remain ambiguous in which case I take no action. ➤ We should note that the price bounced off the 6th March high that acted as minor support and it is trapped above by the resistance zone as labelled in my chart. Ideally I would like the price to break free from this area. That would remove some if not all of the ambiguity. ➤ Conclusion: Hunt is on.
AMEX:SPY
by mrstockyetoro
The curious case for a $28 VIX trip... FUD about to hit markets?FUD FUD FUD, Fear, Uncertainty and Doubt. The 3 letters every trader on the street should know. No matter if you are dealing with Cryptocurrencies, Stocks or Forex, no one wants to wake up to an overnight position hit by FUD. The VIX has long been known as the leading indicator as to the sentiment of the markets. It is known as the fear index and right now it is unreasonably low compared to recent history and current events. I mean we did just arrest our previous President and current candidate for President. Away from politics we also found ourselves in a currency war with the BLOC using the Chinese Yuan for settlements over the US Dollar. Well aside from economics, we still are funding our ongoing proxy war in Ukraine with the only other 2 superpowers on the planet. Well, Away from politics, economics, and war.... Oh wait, yeah the data on our economy came in pretty meh (not impressive). So why in the world would the VIX be representing so much strength? Careful, you are starting to think for yourself and our TV overlords don't like that so much. But you are starting down the right track. The VIX should be easily in the low to mid 20's but instead its flexing at 19.01?!? For reference the 50 Moving Average is 20.63 and the midline of the current Bollinger Bands is 22.04 with the low band being 16.83 and the high band being 27.25. If I was thinking about the next few weeks I would probably think that our world right now is providing significant enough risk to justify a trip northward towards the midline @ 22.04 but actually even higher to the high band of 27.25. Recently we touched 29 multiple times in recent weeks but immediately rejected and shot down to the 19.01 where we sit currently. Rejecting off a ceiling once, twice and even sometimes three times is common but I probably wouldn't need very many fingers to count the times an Index pegged a ceiling 4 times and didnt break through it significantly. The market has stayed propped up on hopium for long enough and now its time to start pricing in reality. All is NOT well. I don't view this as a doomsday scenario at all but we need to move closer to reality. I see 28 as a start, it would signify the markets beginning to accept reality and no longer rely on the Buy the Dip hopium that retail investors bankrupted themselves on over the last 2 years. $28 Vix is what i see coming. Just documenting my own thoughts from my own charts. Dont mind me. Most likely not a human anyway.
TVC:VIXLong
by TheStockMarketSniper
2
Head & Shoulders, 4 Apr 2023🖼 Daily Technical Picture 📈 ➤ Equities continued their advance although it was the DJIA large caps that led the way. We haven't seen that for a while. ➤ S&P500 has hit the first resistance zone. I also got the exit signal to my long position. I guess that's a pretty good place to part from a solid profitable trade. ➤ If we observe some chart patterns, noticeably people have been calling out the head and shoulders formation for a bearish outlook. The right shoulder is being formed. This will be easily discounted if prices moves above the head (2nd Feb high). One could also argue we are in the midst of a bullish double bottom formation with the Dec 2022 and March lows being the bottoms. That will be affirmed also with a move above Feb 2. ➤ Conclusion: I don't rely on chart formations as they are a bit of a hit and miss but it's always beautiful to see one work out. EQUITY TREND: ⦿ Short-term (weeks) - NEUTRAL ⦿ Medium-term (< 6 months) - UP ⦿ Long-term (>6 months) - DOWN
AMEX:SPY
by mrstockyetoro
Neutral, 3 Apr 2023🖼 Daily Technical Picture 📈 ➤ The mid-March march in equities has neutralised the short-term down-trend. A higher high as been set. To move from neutral to an uptrend we need to see a subsequent higher low. That potential higher low could come swiftly. ➤ S&P500 is at key levels with 410 and 417 acting as resistance on the SPY. A correction in the price should close the unfilled price gaps at 404 and 397. The latter target is where the 200-day moving average hovers. ➤ We should also expect some profit-taking especially in the mega cap tech names after a massive near +18.6% quarter gain in the Nasdaq. This too will help to fulfill the above scenario. ➤ Conclusion: I remain positioned long with a moderately-sized position. Just waiting for an exit signal. EQUITY TREND: ⦿ Short-term (weeks) - NEUTRAL ⦿ Medium-term (< 6 months) - UP ⦿ Long-term (>6 months) - DOWN
AMEX:SPYLong
by mrstockyetoro
Navigating The Illusion of SafetyFalse security is dangerous. Wall Street's fear gauge is muted. Is the VIX cruising for a bruising? As mentioned in our previous papers, current times are unprecedented, from geo-politics tensions, restrictive monetary policies, fractured corporate earnings, to sticky inflation. the VIX should be anything but sanguine. Any mild escalation could send equities tanking or soaring at the sight of relief. When the road ahead is that uncertain, straddle saves the day. This case study argues for a long straddle in CME’s Micro E-Mini S&P 500 Options to gain from price action and from rising volatility. Low VIX plus narrow spread between VIX & realised volatility reduces straddle cost. Large price action plus volatility expansion will deliver a compelling 1.25x reward to risk ratio. DEMYSTIFYING VIX Volatility Index ("VIX") is also known as the Fear Index. Higher the fear, greater the VIX. Typically, VIX above 30 points to elevated uncertainty. VIX below 20 describes stable markets. VIX is market’s expectations of S&P 500 Index (SPX) volatility over the next 30 days. It is computed by using the weighted prices of SPX options across a range of strikes expiring within the next 23 to 37 days. It is an annualised quantifiable measure of market uncertainty. Volatility is inversely proportional to the square root of time. A year comprises of 252 trading days. Dividing VIX by the square root of 252 (~16) provides daily expected moves. Current VIX at 20.7% implies ~1.3% daily move. IS THE VIX BROKEN? Several threats loom yet VIX remains subdued. Is it broken? In a recent FT Alpha Ville column, journalist Robin Wigglesworth postulated that the VIX may not be broken. Instead, it has been diluted by product innovation resulting in risk pricing windows shifting away from VIX’s target expiry range. Growth in short-dated options (including zero days-to-expiry or 0DTE options) has shrunk the demand for those expiring in 23 to 37 DTE which VIX is based on. Contracting demand while keeping supply same silences the VIX. THE VIX AND REALISED VOLATILITY In theory, realised & implied volatility (VIX) should be at similar levels and move in tandem. However, in practice where greed & fear trump rationality, VIX overshoots realised volatility. Over the last ten years, VIX on average is 307 bps higher than 30-day rolling realised volatility. The spread between the two at 40 bps is narrow as of this writing, making options buying relatively cheap. MACROFORCES BUT MICRO IMPACT ON VIX AND OUTLOOK FOR 2023 How does VIX respond to rising rates, contracting Fed Balance Sheet, and geo-political shocks? VIX should be sensitive to rate changes & Fed Balance Sheet shifts given tight interdependencies. However, it turns out that it is not as sensitive to these macro metrics. The chart below shows that VIX spiked nearly 400% in March 2020 when Fed hammered rates to zero while massively expanding its balance sheet to fend off pandemic-linked economic collapse. A similar trend was observed in 2008. Notably, VIX did not spike when Fed started to hike rates in 2022. Steady shifts have much lesser impact on it when compared to radical shifts that shocks the system. Chart below highlights key events that sent VIX soaring. Large VIX moves are driven by shocks. Periods of high volatility as observed last year are caused by market uncertainty over a longer period. A radical shift in monetary policy – like the one in 2018 – will send VIX higher. Back then, it jumped on fears of Fed hiking rates. Now, a change in the rate regime could push up the index. A tailwind to VIX is the on-going conflict between Russia and Ukraine. Any escalation could bump it up to levels unseen in the recent past. TECHNICALS POINT TO A REBOUND IN VIX Mean-reversion is common in financial markets. It is the tendency of asset prices to revert to its longer-term average. Since last November, VIX has been trading below its 200-day moving average (200 DMA). It could rise beyond the 200 DMA as it reverts to the mean. EXPLOITING VIX MEAN-REVERSION WITH CME MICRO E-MINI S&P 500 OPTIONS Bullish VIX? Long VIX futures? Perhaps not. Why? Given rising growth in shorter dated options, VIX remains bottled-up. Jumps in extremely shorter-term volatilities fail to show up in it. Therefore, instead of VIX futures, this case study features a long straddle using CME’s Micro E-Mini S&P 500 Options to deliver a compelling and comprehensive return profile gaining from both volatility expansion and price action. The long straddle is designed to deliver profits when the index makes a sharp move either up or down while also gaining from volatility expansion. Straddles are usually considered expensive as it requires two upfront premiums. However, with VIX below its 200 DMA and near the 30-day-rolling historical volatility, these premiums are relatively cheaper. Leg 1: Long 4150 Call on MESM3 (expiring in June 23); premium of 171.25 index points Leg 2: Long 4150 Put on MESM3 (expiring in June 23); premium of 185.50 index points Premium: $1,800 ((171.25 + 185.50) * $5 = 356.75 * 5 = 1,783.75; ~$1,800) *Note: 1 point move in MESM3 = $5 Break-even points: S&P 500 futures at either 3790 or 4510 Target: S&P 500 futures at either 4600 or 3700 Profit at Target: $450 Stop-loss: At 20% of the drop in options premium Loss at Stop-loss: $360 A long straddle generates returns when (a) underlying futures trade past break-even points, and (b) volatility expands. As expiry inches closer, the straddle loses value which requires close monitoring. CME offers a wide range of options on deeply liquid S&P 500 futures. To meet growing demand for shorter-dated expiries, CME is expanding the listing cycle of Micro E-mini Options on Micro E-mini NASDAQ and Micro E-mini S&P with expiries available throughout the week, on every business day. These ultra-short, or same-day expiries can be used to reduce straddle cost further enriching returns from this strategy. Also, investors can fine tune their hedging & trading with shorter expiries and smaller notional values. At 1/10th the size of the E-Mini contracts, Micro E-mini Options require less capital to enter the market with more approachable margins for short positions. MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description. REFERENCES www.cmegroup.com www.cmegroup.com
CME_MINI:ESM2023Long
by mintdotfinance
3
Room for MOAR? 31 Mar 2023🖼 Daily Technical Picture 📈 ➤ Once again equities gapped higher. Depsite some "gap filling" action, price recovered to finish some distance from the lows. All is not equal of course, Nasdaq still leads the way and Russell2000 small cap woefully lagging. Long big tech and and short the weaker small caps would have been a wonderful trade. ➤ So is there MOAR upside to come? From a technical standpoint, yes, perhaps a bit more. Immediate resistance at 405 on the SPY followed by 410 and 417 areas. It will require VIX to remain low for the higher targets to be achieved. That is certainly plausible. Note that a print above 407.45 (6th March high) would void the short-term down trend due to a higher high. ➤ Keep in mind the sizable lower price gap that is unfilled from Wednesday trade. ➤ Conclusion: Still holding on to my moderate long position. An exit shouldn't be too far away especially if there is a sizable down turn in price. EQUITY TREND: ⦿ Short-term (weeks) - DOWN ⦿ Medium-term (< 6 months) - UP ⦿ Long-term (>6 months) - DOWN
AMEX:SPYLong
by mrstockyetoro
VIX - is the sell 20, buy 30 strategy done?Throughout 2022 you would have done VERY well taking profit when the TVC:VIX hit 20 and accumulating when the VIX hit 30. But has this trend concluded? This movement and profit/accumulation opportunity is consistent with the most recent tightening from 2017 to 2018 where fed funds were rising, and the yield for 2 year treasuries in the bond market exceeded fed funds. When the yield for 2 year treasuries fell below fed funds the VIX remained below 20 until covid hit. The VIX spiked during covid and consistently descended while the market expanded. This pattern is only observed in the most recent cycle and not something that we see consistently repeated historically. If the 2 year remains below fed funds, should not expect the VIX to range between 20 to 30 or will 20 to become the ceiling?
TVC:VIXLong
by Ben_1148x2
The Case for UnemploymentUnemployment is tricky. You just cannot announce high unemployment. The political damage is too much to take. But unfortunately, the time comes when unemployment just increases... Every sane person would want the economy to remain calm for as long as possible. This is not sinister or bad. After all, it is in the duty of Governments and Central Banks to keep our daily lives as calm and peaceful as possible. Bad unemployment data is inherently bad. It is worse than bad inflation data. So it is always a tricky situation... After the inflation chaos, calm has return to the financial world. Volatility and inflation is lower, equities are higher! So all is well! Not only inflation is lower, but also unemployment! With an ultra-low rate of 3.4%. News just couldn't be better! Initial claims is also breaking down, signaling better days ahead... After all, low unemployment is good! Right? Not so fast fella! Low unemployment is good for, well, employees! But it is bad for corporations! Finding skilled personnel is incredibly hard. So much so, that most companies underperform. They just can't grow! I believe that unemployment does not necessarily break the economy. And the economy does not necessarily break the unemployment. It is a mixed bag... Sometimes, businesses benefit from high unemployment. If the antagonists fail, others get their workers, and most importantly, the piece of the pie! Some companies grow while others fail... Believe it or not, low unemployment is risky. Especially when it is in a 54 year low... It just cannot go lower! Recent unemployment data is perfect. However, Continuous Jobless Claims (USCJC) may give us a new perspective... It is at times like these when we see conflicting data. Continuous Claims increase while unemployment rate is decreasing. At that period, the official unemployment rate was making lower lows! This is deeply concerning. Especially when it is eerily similar to 2020. Perhaps it is a shift of balance right before a crisis. Perhaps a period when long-term employees lose their jobs since companies attempt to cut down costs. Instead, they hire less skilled workers with lower wages, perhaps for part-time jobs. This may be the last attempt of companies to stay afloat. It is also the last attempt for families to stay afloat. High food prices necessitate work at all costs, no matter how low... A crisis may be brewing... A Black Swan one, just like 2020. The Big Tech bubble is literally hollow, full of derivatives aka weapons of mass destruction. And the scale and the ramifications of such a crisis are still unknown. (By inflation pressure I mean the amount of work the FED does to fight inflation. While this chart increases, inflation gets out of hand) Perhaps all of this is meaningless. Only time will tell what will happen... WW3 commence I guess? Tread lightly, for this is hallowed ground. -Father Grigori
ECONOMICS:USCJC
by akikostas
3
The 400, 30 Mar 2023🖼 Daily Technical Picture 📈 ➤ Equities shot up higher with you guessed it...Nasdaq leading the way. If investors did not have a large tech allocation, they have been left way way behind at least so far this year. ➤ S&P500 is up 5% YTD but is now back trafficking at the 400 level. This has been the recent "zero" line from where prices oscillate up and down 5% on either side. With VIX now collapsing to low levels, the up move since the 14th March low may be limited. This is especially true as we are in a range-bound market regime. ➤ Given the above, I took off half of my long position leaving a moderate sized exposure. In this environment, whenever price hits resistance or support, there is a chance the price can reverse rather aggressively. ➤ Note the sizable price gap due to today's jump at the open in the SPY. In recent times, all these gaps have been filled either immediately or shortly in the future. I don't see this gap being any different. ➤ Conclusion: A decent profit so far making up for lost time due to the sporadic trading action this month. EQUITY TREND: ⦿ Short-term (weeks) - DOWN ⦿ Medium-term (< 6 months) - UP ⦿ Long-term (>6 months) - DOWN
AMEX:SPYLong
by mrstockyetoro