«Here’s what a low VIX means.»
Traders,
As stocks have soared, implied volatility has sunk. But unlike previous episodes where declines in the CBOE Volatility Index (VIX) have rapidly reversed, this one is sticking around. Traders have to acclimate themselves to a new lower volatility environment. Here are three implications of having the VIX sitting at 20.
- A VIX of 20 means SPX options are pricing in daily moves of 1.25%. And, based on recent market movements, even that seems too high.
- Premiums have been lowered across the board. That means lower paydays for naked puts, covered calls, condors, and the like.
- As long as the low VIX lasts, we won’t see the massive swings of the year’s first half. The hellish ride of 2022 has turned into a kiddie coaster.
Hallelujah.
Video Of The Day: Jedi Options – What is a Put Calendar Spread?
In today’s Jedi Options, Coach Tyler explains what a Put Calendar Spread is.
Chart of the Day: CBOE Volatility Index ($VIX)
The CBOE Volatility Index has found a new home near 20. Despite the market selling off the last few days, the VIX has been reticent to rise.
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