NaughtyPines
Short

THE WEEK, MONTHS AHEAD: VIX, VXX, UVXY, SVXY

CBOE:VIX   Volatilitätsindex S&P 500
As 2017 comes to a close as one of -- if not the -- lowest volatility years ever on record for the S&P             and Nasdaq, I'm not hopeful that this low volatility won't continue for some time to come. To be honest, though, no one really has any way of knowing or predicting volatility going forward, except in the most obtuse of ways, such as forecasting market performance over a given time period or pointing out exogenous risks, which can in turn drive the volatility environment. Since predicting volatility going forward is a total crap shoot to me, I feel it's best to play the ball "from where it lies" and to adapt when the environment changes, rather than trying to predict when and how much it's going to change.

With this in mind, I plan to continue to keep doing what appears to be working (and, really, what has always worked, albeit with some periodic bumps in the road): shorting volatility products that have been the gift that kept giving in 2017, as much as being bullish broad market (short puts, short put verts, long call verts, long calls) was pretty much the gift that kept on giving in the same time period. At some point, this strategy will in all likelihood cease to work so well; until that time, it's just a plain time saver not to worry about checking the high implied volatility screener on a daily basis, since -- in all likelihood -- I'm not going to find anything there that meets my basic premium-selling criteria until things change their tune in substantial fashion from a volatility perspective. Previously, I religiously checked that screener on a daily basis (I probably still will; old habits die hard), but my guess is that the markets will continue to make that mechanical approach to premium selling in this market very short work, as that process has repetitively yielded very few worthwhile candidates for premium selling for weeks (if not months) on end in the stuff I like to trade -- broad market and sector exchange traded funds.*

This week, I foresee only doing my weekly VXX             long put vertical trade; the way it's looking, it'll be the Feb 9th** 27/30's or 27.5/30.5's given where VXX             is at now. As previously pointed out, I'm hesitant to wade into UVXY             here given its lowness to the deck and the likelihood it'll reverse split soon. The reverse split is not a "deal killer," but rather just a choice not to be in some funky, non-standard options contracts post-split. As always, I'll keep an eye out for any VXST/VIX >1.00 or VVIX             >110 pops; it's possible that we could get one as investors opt for taking tax losses in their crap piles before the year's done and/or reposition anew in 2018 ... .

* -- Naturally, I'm way more picky than some as to when sell premium. I expect certain things out of premium selling setups profit-wise relative to accompanying risk, and if those things aren't there, I'm just not going to play the market that way. The alternative approach is to take what the market gives you, regardless of implied volatility ; this approach has its merits (cash flow, for one). After all, having no premium selling plays on in this market generates "nothing" cash flow; having something on generates something; and something is always greater than nothing.
** -- Feb 9th             should open up on Thursday, if I'm not mistaken.
Missed the August split on UVXY, looks like splitting around jan 16th, had a spread open and counted myself lucky to get out down ~$18 (immediately at the next open); they basically instantly turn into a position you would never open.
Antworten
NaughtyPines Tom1trader
@Tom1trader, My guess is that there are liquidity issues since, as time goes by, there are fewer and fewer buyers/sellers for non-standards. It's one of those: "I'd rather not" trades.
Antworten
Tom1trader NaughtyPines
@NaughtyPines, Exactly, at the time I was sweating to see any bids! :-)
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