VIX Workshop

With October just about in the books, let's do a review of where volatility went this month. October is typically one of the most volatile months of the year. For what it's worth, a 20 year seasonality chart shows the first week of October as the seasonal high for VIX, with an average of 24. This is in direct contrast to this year's action when the same time period saw the return of repeated sub-10 VIX prints. This certainly raises the question as to whether VIX seasonality applies in any way this year with VIX again near all-time lows. VIX Seasonality, 1997-2017 In fact, the hourly chart of the month of October shows a slow but steady climb in spot VIX. After staying under 10 for the entire first week of October, VIX put in a low at 9.11. Since then VIX has seen a few mini-spikes. The first real spike of the month was on October 19 in the premarket session, before US traders even had a chance to wake up. A second and slightly larger spike put in the high for the mo...

The easiest trade in the market is in XIV and SVXY – just buy the dip, right? Wrong! In very calm markets that may be true. Gains in these funds are compounded daily as long as volatility is decreasing and futures are in contango. It really is a mindless trade when things go well. From January 1, 2017 to its all-time high on July 24, XIV rose 105%, in what was mostly a steady, daily rise with few interruptions. After late July though, the behavior on the XIV and SVXY changed. The overall term structure of the VIX futures is certainly a little higher than it was in July, but both of these funds are down 17% from their highs in the last 6 weeks, even though VIX continues to stay in the low teens. What's going on under the hood? Beginning in late July the market began to see frequent VIX spikes, on average once every 7-10 days. Although these spikes weren't high in absolute terms, on a percentage basis they were quite large: Date VIX HIGH % S...

An interesting picture is emerging among the leveraged VIX funds lately. ETFs such as UVXY and TVIX have not been going down at the same rate many have grown to expect. Since July 26, UVXY has not created a new low. This is the longest such period so far this year. In fact it's the longest period since February 2016. What's causing this unusual behavior? VIX hit an all time intraday low of 8.84 on July 26, 2017 . Since then, the VIX has had a few spikes along the way, each time receding to a slightly higher floor, and as of the writing of this article on August 30, rests just above 11. In the span of a month, VIX has essentially risen 25%. Many new traders of the long volatility ETFs are starting to describe “support” on UVXY around 30 or 30.50. And in a way, they are not wrong. The ETF has not had a close below 30 in over 3 weeks, and UVXY certainly seems to bounce off of this level each and every time it has come close in the month of August. UVXY from July 2...

A question I often see that comes up in online chats and tweets, especially during an overnight market event is how do I know what the value of UVXY is? Afterhours closes at 8pm ET so it's impossible to know what UVXY is doing until the premarket opens the next day, right? Absolutely not! Once you have a few pieces of information, you can set up a spreadsheet fairly easy and determine for yourself what the value of UVXY, TVIX, or any other VIX Product is during the overnight hours. It even works for the short funds like SVXY and XIV, just with a different calculation. So what do you need to get started? First it helps to understand how UVXY derives its value. UVXY is an average of the first two months of VIX futures. In most cases, paying attention to the percentage change in these futures from the previous close is all you need to determine the value of UVXY. So here's the list of what you need: Daily settling price of VIX futures Closing price of UVXY.IV at ...

I'm a veterinarian. So why am I starting a blog about trading? I guess it's because I have an obsession with numbers. Which is weird, I think, at least for a veterinarian. No one probably ever wanted to be a vet growing up and said hey I actually like doing my business's own bookkeeping, filing my taxes, or analyzing market trends. I'm supposed to be doing surgery, and playing with puppies, and healing the sick. How could staring at a spreadsheet possibly be more interesting than that? And don't get me wrong, I love that part of my job. Nothing beats the feeling seeing a beloved pet pull through an illness because of a team effort I helped direct at the clinic. Yet there's some kind of appeal in seeing a numerical representation of emotion. At least that's how I see trading. One minute the price of something is $25. The next minute it's $25.50. Why? Suddenly someone with a few hundred shares thought it was worth more than what the last guy sold it ...