Tuesday, August 11, 2009

VIX Calls Attract Attention

The VIX is up about 7.4% as I type this, to 26.84, as the recent rally is finally beginning to shows signs of running out of steam.

Weakness and stocks and the rise in the VIX has generated some interest in VIX calls, with the September 35s, September 45s and August 37.5 calls attracting most of the action at the ask.

With today’s session not even at the halfway point, VIX call volume is running at a high level and the ratio of VIX calls to puts is considerably higher than the recent trend, as the chart below from WhatsTrading.com reflects. It is difficult to determine whether the VIX options activity reflects new speculation or new hedging activity, but my best guess is that a good deal of the activity is speculative.

Note that VIX options expire one week from tomorrow (see expiration calendar) and have a last trading day of one week from today.

Any close over 26.31 would mark the highest close in the VIX for a month, but it would take a spike all the way to 28.13 to bring the VIX to a level that is 10% over its 10 day moving average.

[source: WhatsTrading.com]


Chandra said...

Rise in VIX call volume/buying means it's time to go long on stocks, or even better, sell puts with elevated volatility.
After tomorrow's FOMC statement, equity market should revert back to 1000+ on the S&P (with banks stocks leading), USD will weaken against other majors, and yield on 10 year-T will fall back to 3.5% (or lower). FOMC will reiterate its prior policy statement of considerable easing for long time. Today's and yesterday's market move is all noise, in my humble opinion.

Anonymous said...

Chandra, you seem to know the move of every instrument before it's happened. Interesting.

If you want to get long stocks, you might want the stock market to go negative tomorrow, because post fed days have a tendency of retracing the fed day movement, regardless of whether stocks rose or fell.

Don said...

VIX August 37.50 calls active at the ask? WOW.

Eric said...

Anyone notice that the Baltic Dry is down almost 40% in the last two months.
People used to pay attention to this. Can't be good for commodities, etc.

Douglas said...


I do seem to remember you saying that for various reasons you thought that the VIX was reaching a floor. I do remember wondering what those various reasons were as I had only one or two reasons for thinking the same. It looks as though you were right.

Anyway, my latest blog post is not inconsistent with this although I am looking at the VXO rather than the VIX.


stonebat said...

one possible scenario to explain the market trend....

the excessive money liquidity around the globe is creating da mother of all asset bubbles. not many wanna go after the real estate market. so go after the equity market. during the inflation era, stock market tends to outperform bond market.

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2023 Bill Luby. All rights reserved.
Web Analytics