May 26, 2015

Volatility Views 159: The VXUP and VXDN Surprise

58 minutes

Volatility Review: Looks like the market started taking the weekend out on Thursday, and never looked back.

VIX Cash: Low: 12.09, High: 13.27

S&P 30-Day realized: 10, S&P 60-Day realized: 11 VVIX: 74.50 - on the lower end of its recent range.

Skew Index: 121.11 - also on the low end of recent range.

Put vs SPX White Paper: A Leveraged Portfolio Management Approach Applying The CBOE S&P 500 PutWrite Index.

VIX Options: A strong volume week. 945K Contracts on Monday, 750k Tuesday, 700k Wednesday and only 350k Thursday.

VIX Up / VIX Down: Despite our doubts last week, the product is doing heavy volume.

Question from IVDaily - Please explain the VXUP and VXDN products to me. I am very confused. What am I getting if I buy this thing? Its not really spot VIX that I am getting, but the actual percentage move in the spot VIX, correct? What does this paired contract thing mean? Do I have to wait for someone to sell VXUP before I can buy the VXDN and vice versa? Shed some more light into the darkness please guys.

Volatility Voicemail: Listener questions and comments

Question from Gerry Engle - Hola fellows. Like the programs especially Option Block and Volatility Views. I noticed you guys do not talk much about technicals. The few times you have mentioned them you seem to take a dim view of them. Why is that? Are there no technicals that you feel are useful for options traders to pay attention to? What about volatility technicals?

Question from Ibrahim Hawash: Hi Mark. This is Contrails again, after several months away from options I forayed into Forex my original trading stumping ground smile emoticon I learned a lot about price action support and resistance, trend lines, pivots etc... I am looking now into options for position trading. I am so comfortable doing directional trades, bullish and bearish speculation and not yet into vol trading. My question is if I find a stock sitting on strong support and at a very low IV% (MU and PG is what I am looking at) along with confirming buying volume would you buy a OTM or ITM calls? I have a feeling you will say why not sell puts smile emoticon but let’s stick with calls for now given my account restriction. Is there a golden rule on choosing ITM vs OTM in this situation? I read that only buy ITM calls because OTM expire worthless as in hear.

Also my understanding that when IV% is very low you would not buy call vertical spread and choose to buy calls, is this correct? I also have a question, do leap options IV increase at earning times along with shorter expiration options? One more thing, forgot to ask that I am looking to buy calls expiring in 2-3 months and I am looking at daily candle stick charts.

Crystal Ball: Reckless prognostication. Will there be a Tuesday morning pop?

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