June 29, 2015

Volatility Views 164: Can VIX Go to 5?

55 minutes

Volatility Review: A look back at the week from a volatility perspective

VIX Cash: VIX poised to start moving aggressively again?

VVIX: Hovering around 85 - near the low end of its 1-year range.

VIX Options: Back to light volume - all sessions below 500k. 3.8/1 Calls over puts.

RVX: OI 62 contracts.

VXUP / VXDN: Light week here as well - VXUP most days well under 30k shares, VXDN under 5k shares.

VSTOXX: Flirted with a 5-month high of 27.5 earlier this week.

Crude Oil: Crude Vol creeping lower. OVX - 29.18, OIV - 29.36

Rates: TLT Aug IV = 16 - Has not changes much over the past month.

Volatility Voicemail: Listener questions and comments

Question from Nick James - Tuned in last week for the first time and heard the discussion on volatility products, and particularly the AccuShares VIX products. I have been intrigued by this product and found your conversation interesting. It sounds like you take a dim view of it and would recommend against me buying shares of the VXUP version. How would you fix it if you could?

Question from St. James - How low can VIX go? You guys said on a recent show that a VIX of 1 was not realistic. So what is a realistic low for VIX?

Question from Encore - I am a fan of bullish risk reversals or collars in the equity and index world, due to the volatility premium inherent to the puts. It looks like that similar strategy is not as effective in VIX Options and most volatility products. The volatility premium is in the call, so most bullish risk reversals end up costing a net debit rather than generating a credit. So, should I take this to mean that I should flip my strategy to employ bearish risk reversals instead in volatility products? Do they tend to be more effective, or are the call premiums merited in volatility products?

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