Welcome to our 2/6/2019 State of the Market video with Seth and Wayne. In this week’s SOTM video we discuss with great detail the Volmageddon event as it anniversaried on 2/5/2019. In addition we also address all matters surrounding the equity market from the State of the Union address to overbought markets coming out of oversold conditions from Q4 2018. Please see our outline below and click the link (duration 59 minutes)
- Introduction to State of the Market and Volmageddon review from February 2018, personal experience and reference to today’s Bloomberg Volmageddon Anniversary article. (0-11 minutes in)
- Discussion on Finom Group VIX-trading, Macy’s, Apple trade/ing. Maintaining account liquidity during VIX spikes, eventually VIX peaks and decays significantly. (11-20 minutes in)
- VIX 25 signals near-term top for VIX, bear market conditions don’t make .SPX OTM options any less expensive. Investors raise cash in favor of buying downside protection. 2017 Volatility participation helped produce Volmageddon. Natural order of market volatility is to decay over time (20-27 minutes in)
- VIX is a stochastic reading, a derivative of .SPX OTM (30-day implied volatility). Volatility exists in regimes, the macro considerations for participating in a volatility trading strategy. Introducing new VIX-complex and trading the VIX-complex course for subscribers (27-42 minutes in)
- VIX Futures Term Structure discussion and analyzing level of contango. Why can’t we build more contango? Contracts are moving very parallel even with large SPX move. Don’t try to forecast volatility near-term as it’s a losing battle.
“In order to get larger contango in the $VIX futures term structure, the near futures need to go down much more than the far futures. This is not happening in the last few days. The curve is moving in “parallel”. For 7%+ contango to materialize, this needs to change.”
- VVIX-VIX correlation/prices, VVIX tends to lead VIX move in either direction, but when VVIX dips under 80 it tends to not be a GOOD leading indicator of VIX move to come. VVIX under 80 tends to simply bring out protection buyers because its cheap protection below 80. (42-48 minutes in)
- What about the State of the Union address? The market brushed off State of the Union address. Wayne offers his outlook on the current state of the market and near-term direction probability. Overbought conditions defined and reviewed. Discussing SPX 200-DMA and the S&P 500 BOX upper level. Still an algo-driven market that seeks out technical levels. (49-59 minutes in)
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