VVIX trade ideas
VVIX touched above 120 today (not yet pictured on chart)VVIX measures the volatility of volatility. It's an expected move in volatility, which is an expected move in stocks. Thus, it is another layer of looking at the market Last time VVIX traded above 120 was during Brexit in June 2016. This is extreme fear!
VVIX cheap, long volatility ahead of FEDVVIX represents the volatility of the VIX indicator, more precisely its the 30 day expectation of the VIX index which is the expectation of implied volatility in the SPX in 30 days time. Read more on this on CBOE's website.
VVIX is mean reverting in nature, as it is as index and non-tradable it represents this mean reversion without market expectation building this into its price directly, some expectation will be implied from VIX futures market - and that whole "tail wags the dog" argument.
I believe the VVIX is unusually low as can be eyeballed by the chart I have created. Despite the SPX coming off its all time highs and global discussions on NIRP, economic slowdown, migrant crisis, Oil crisis etc...
For me this implicitly represents an under pricing of volatility risk protection, I can backup this confidence with looking at market Junk bond demands and Puts & Calls Open interest on the S&P500, relatively low put volume especially around the current market price.
I am expecting a pickup in volatility as we approach the FED March 16th rate decision and this presents an opportunity to purchase exposure to volatility then profit from its explosive nature if the future looks a little less clear cut.
VVIX - where I look for complacencySometimes bears get ahead of themselves and start pointing to "complacency!" so often that you figure when they give up and stop then complacency will be finally at hand.
Well I use the VVIX to tell me when we have hit complacency, along with my "freakout indicator" which tracks the VIX & VVIX along with the S&P % above DMAs (50 and 200) for the 100 and 500.
When all those things are complacent then the bears are usually off in a corner shaking their heads, which is when it is time to go all in short. For the VVIX, 77 is the critical line that the index needs to sit under. The VIX then (invariably) goes low and the S&P is chugging away at highs, dragging all the garbage out there up with it.
On the chart is the channel that the VVIX is in as it starts moving towards 77. Notice last June 5th where I have placed the Red arrows? There is your higher low on the VVIX, starting its trend back upward. Also notice the freakout indicator - everything bunched at the top. The gray line leading downward is the VVIX which is later followed by the cyan VIX.
When we return to that same posture I will pick the weaklings first for my shorts and then move to the broader stuff. For now I just short tactically (like AMT).
BTW - notice we are setting up for going under 77 in May? That is right when the liquidity effects of April 15 tax collections (happens every year) and EU/Chinese QE (happening this year) will be juicing the markets. Maybe enough juice to send things higher so that even the garbage is flying (like last June)
Happy hunting.
VVIX, Twin TowerThe VVIX measure the cost of buying an insurance which is the second derivative of cost put protection
Based on my last post on 27 Oct, price were on an accelerated retracement back to lower channel. It pierced through and break down of the channel making it look like more downside to come, and within the accelerated downtrend, price got rejected again by underside of channel resistance (to trap bears). This instance coincided with SPX megaphone broke up (to trap bulls). Hence both bulls and bears were trapped with two different indices!
Since i trusted channel so much, i though if channel is valid price will be sucked back into the channel.
And indeed, when the 2nd gap started and break into the channel, my long was triggered.
Exited 90% of my long, left 10% for probably another kiss good bye for upper channel resistance
Volatility of Volatility IndexAs the saying goes, "still water runs deep", VIX has dropped down from 30 to 16, but the VVIX is still very high at 100.
The VVIX measure the cost of buying a measure of the cost of insurance which is the second derivative of cost put protection
It could be a sign of serious fear still lying beneath the surface of the stock market.
The price is contained in normal uptrend channel. I suspect another higher high to give a bearish MACD divergence. Besides, we shall see whether the RSI trendline is able to provide support
