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Are we ready for a single digit VIX? 05.14.18
Are we ready for single digit vol again?
We just put in a drop to the 12 handle in VIX for two days in a row. One would have to travel back to Jan2018 to taste those numbers. For whatever reason IV is discounting the news out of Washington DC as opposed to caring about every twist and turn in February. Will it continue?
I posted a chart from VIX Central and notice the Jun VIX future is about 1.50 over cash. That is a little light for me and with VIX this low the premium should be bigger. Either the vol market is expecting another .50 or more crush in VIX or juice sellers got a little ahead of themselves. We are setting up a “deep contango” trade where VIX could fall apart, ATM IV to 9%, which would produce lower numbers. It is something to keep an eye on. This usually spells more downside for UVXY, VXX.
The steeper the future premium the larger weight on the vol products. The trick is how much. If you want to learn about this sign up for tomorrow’s FREE webinar here.
Disclosure: Positions in VIX, VXX for Karman Line Capital, LLC