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Tag: vix

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The Best Freaking Trade Out There

VIX Investwithalex2

Now that everyone has boarded the Nasdaq’s train to prosperity and new bull market, take a look at the chart above. See those massive gaps? They are making my mouth water with anticipation.

Plus, everyone is slamming VIX/VXX at exactly the wrong time. For instance, Fear not–VIX signaling all clear for stocks: Strategist 

Did anyone stop for second to think that this might be super bearish for stocks?

Of course not and I guess I”ll have to repeat what I have said here right before VIX/VXX surged higher last time.

Previous Post: 

We have talked about VIX/VXX before. First, there is a massive short position against the volatility index near its all time lows. Plus, consider this. According to the COT reports……

  • Commercial Interests (smart money):70K Long Vs. 27K Short
  • Leveraged Fund & Speculators (dumb money): 49K Long Vs. 33K Short

As I have indicated in my COT Weekend update, commercial interests tend to win. Although, the timing is not always exact.

So, we have a massive “smart money” long position and a massive “dumb money” short position. And at the time when VIX/VXX hitting all time lows.

Something tells me that as soon as this period of low volatility ends, VIX will stage a massive rally to the upside. As much as 100% or more and within a short period of time. And I am not the only one who thinks that. You Can’t Keep the Panic Out of Stocks Forever, VIX Traders Say

So, is this the best trade out there today? Well, that’s for you to decide.

z32

The Best Freaking Trade Out There  Google

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Is Volatility (VIX/VXX) About To Surge?

VIX indicator

I often say that the stock market has two objectives. 

  1. To fool as many people at once as possible.
  2. To put everyone to sleep or on auto pilot right before a large move in the opposite direction starts.

Watching the stock market this week has been about just as exciting as watching the grass grow. What’s more, about 99% of investors out there are incredibly bullish. We are talking about the Dow 20K in a few months kind of bullish.

Has the stock market set its trap once again? 

At least according to the Volatility Index (VIX), the answer is YES. As everything else out there, VIX moves in cycles. And with the stock market approaching irrational exuberance levels while triggering multiple overbought indicators, the VIX is approaching the bottom of its trading range. Suggesting, as it did in September of 2014, that fear is about to rear its ugly head. The only question is, are you listening or are you asleep at the wheel?

Z30

Is Volatility (VIX/VXX) About To Surge? Google

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A Closer Look At VIX And What It Predicts

VIX

VIX, often referred to as the fear index, continues to decline to levels unseen since the 2007 or right before the collapse. While most market pundits dismiss this measure as a simple volatility gauge, it would pay big dividends to pay closer attention. Here is why.

  1. Historic Lows Indicate Trend Reversal: Historically, when VIX approaches historic lows it tends to reverse shortly thereafter, typically leading to massive sell offs synonymous with 1987, 2000, 2007, etc…. Suggesting today’s environment is very dangerous.
  2. Shows Complacency & Excessive Risk Taking: I continue to maintain that the amount of risk taking in our financial system is off the charts. Although it is hard to see due to “Asset Inflation” and “Massive Stimulus”..… it is there. Plus, with most speculators being in a comfortable and soothing state of sleep (due to lack of volatility), a sharp bear market move here might snap everyone back to reality.
  3. Combining VIX, Cycle Work, Seasonality and Fundamentals: While looking at VIX alone won’t allow you to predict anything, combining it with other measures can give you a fairly accurate picture of what is to come. With market internals deteriorating, 5-Year cycle now complete, “sell in may and go away”  and extreme levels of fundamental overvaluation/speculation, VIX suggests a violent move.

Conclusion: Considering all of the above and with VIX at $11.77, this is a clear recipe for a disaster. The only question is when. If you would be interested in learning exactly when this bear market will start (to the day) and its subsequent internal composition, please CLICK HERE

Z31

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Attention: VIX Foretells A Major Market Beating Ahead

The VIX is scratching the bottom of the barrel here, indicating outright complacence in this highly speculative and overpriced market. Selling around $12.75 VIX is not that far from it’s all time low. Just as a reference point, we faced a very similar situation in 2007 when VIX got into $10 territory. Right before the 2007-2009 collapse initiated. Today, we face a very similar situation. Not only in VIX, but in market’s fundamental setup. As per out mathematical and timing work the bear market of 2014-2017 is just around the corner. When it starts expect VIX to spike. If you would be interested in learning when the bear market of will start (to the day) and it’s internal composition, please Click Here. 

VIX

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Attention: VIX Foretells A Major Market Beating Ahead  Google

Why the market may be underpricing fear

Is the market too complacent? 

Right now, it looks like fear has been in a little bit of a bear market, at least when measured by the CBOE Volatility Index, or “the fear index” as it’s affectionately called.

The index basically measures the cost of insuring stocks against a fall, and from the looks of it, the market isn’t all that fearful. As of Thursday, the VIX was trading around 13. Just two weeks ago, it was as high as 17 and, in early February, it was above 21.

That may not be a good thing. The VIX and stocks tend to move inversely. Often times, a low VIX can signal complacency. And despite some global turmoil, judging by the VIX, investors don’t seem that concerned.    

“Trading the VIX has really been tough,” says CNBC contributor Andrew Busch, editor and publisher of the Busch Update. “People have been trying to buy breakouts on this, expecting bad things to happen like the Ukraine.”

However, those expecting the VIX to break above the 21 handle have thus far been disappointed. Busch notes that the VIX has stayed well within a range of between 21 and 11 for the past couple of years, a far cry from exactly four years ago when it hit 48.2.

CNBC contributor Gina Sanchez, founder of Chantico Global, said that although issues such as shake-ups in emerging market currencies and the Crimea crisis have caused the VIX to spike ever so slightly, the market is still pricing risk down.

“They’re ignoring [risk issues] and they’re looking towards the fact that we’re coming out of a cold weather spell that has kept macro data down,” said Sanchez. “That macro data is starting to pick back up. We’re starting to see better jobs numbers. The general positivity in the markets is basically causing the markets to underprice risk.”

Sanchez believes the market is underestimating risk at a time when she thinks stocks are fully priced if not slightly expensive.

“Any of those risks could actually have a devastating effect on the markets,” said Sanchez. “That’s why it’s important to watch the VIX when it gets this low.”

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Brilliant or Stupid? Trade Of The Week

A trader bought 150,000 bullish contracts on the VIX expiring in May with a strike price of 22, ($7.95 Million) while selling the same number of May 30 calls in a strategy known as a call spread, according to New York-based Miller Tabak & Co. 

Perhaps this is one of my subscribers. When you can  predict and time the market with great precision (as we can), this trade makes a lot of sense. While I will not comment on the trade directly, it does make a lot of sense if the Bear Market is about to start with a vengeance. As per my work on this blog, the bear market of 2014-2017 is, indeed, about to start. If you would be interested in learning exactly when it starts and it’s exact composition (exact up/down moves during the duration of the bear market) please CLICK HERE.  

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Brilliant or Stupid? Trade Of The Week  Google

 

VIX Trader Pays $8 Million on Bet Gauge to Rally 60% by May

An investor paid about $7.95 million for a trade that will pay off if the Chicago Board Options Exchange Volatility Index rallies at least 60 percent by May.

The trader bought 150,000 bullish contracts on the VIX expiring in May with a strike price of 22, while selling the same number of May 30 calls in a strategy known as a call spread, according to New York-based Miller Tabak & Co. The trade cost 53 cents to put on for each contract and it will profit if the volatility gauge rises above 22.53 from the current level around 14, data compiled by Bloomberg show. It has a maximum payoff if the VIX more than doubles to 30.

“It was one of the largest VIX trades we’ve seen in a while and an interesting way to put on a tail-risk hedge,” Lillian Seidman, an options strategist at Miller Tabak, said in an interview. “This is a play on the VIX shooting through its high not seen for the last couple of years.”

The VIX, an options-based measure of the price to protect against losses in the Standard & Poor’s 500 Index (SPX), soared 26 percent to 17.82 last week, while the benchmark equity gauge fell 2 percent for the biggest drop in seven weeks on concern that the standoff in the Crimea region between Ukraine and Russia could worsen. Almost $1.7 trillion was erased from global equities between March 6 and the end of last week, data compiled by Bloomberg show.

Share Rebound

Stocks rallied today after President Vladimir Putin said Russia wishes no harm to Ukraine. U.S. and European leaders condemned Russia’s push to annex Crimea and promised further sanctions as early as this week in the worst dispute since the Cold War.

The VIX, which hasn’t closed above 22 since the end of 2012, slumped 7.2 percent to 14.52 today. The gauge has fallen about 19 percent in the past two days for the biggest slide in more than a month. The May 22 and 30 VIX calls were the most-traded options contracts across U.S. exchanges today.

“Someone’s opening a new position in these VIX options,” Fred Ruffy, a Chicago-based senior options strategist at Trade Alert LLC, said in a phone interview. “It’s a view that volatility may spike over the next couple of months.”