VVIX Crazy High...and yet...Low

09/10/2015 8:00 am EST

Focus: OPTIONS

Mark Sebastian

Founder, Option Pit LLC

Though it is finally off its highs from the last few weeks, the fact that VVIX has stayed this high for this long makes option trader Mark Sebastian, of OptionPit.com, believe his market story may not be quite over and he outlines why he likes buying premium on these vol sell-offs and thinks VIX call spreads might be the cheapest market hedge right now.

The VVIX is finally off of its highs from the last few weeks.  Even so,  VVIX at its current level would qualify as a major VIX options vol spike over the last two years. The fact that VVIX has stayed this high for this long makes me believe our market story may not be quite over.

chart
LivevolX for Lightspeed www.lightspeed.com
Click to Enlarge

And yet, as high as VVIX got, one might argue it was still too cheap based on how much VIX and VIX Futures are moving around. Take a look at HV for 10, 20, and 30 days in VIX:

chart
LivevolX for Lightspeed www.lightspeed.com
Click to Enlarge

The lesson:  Remember with VIX and VVIX it is almost always buy high sell higher, sell low and buy lower. The opposite of stocks.

The Trade: We see IV as stiff at least through the Fed.  We like buying premium on these vol sell-offs. VIX call spreads might be the cheapest market hedge right now.

By Mark Sebastian, Blogger and Contributor, OptionPit.com

  By clicking submit, you agree to our privacy policy & terms of service.

Related Articles on OPTIONS

Keyword Image
Collar Hedging Strategy
01/28/2019 12:38 pm EST

Jay Soloff, who is presenting at MoneyShow Orlando Feb. 7-8, describes a no-cost collar strategy and...