Victory Goes to the Patient - VIX 2/14/2021
VIX at the weekly view.
This is probably my last posting day for a while as my work days gotten longer. I'm still at the office as I am typing this.
Let's make this simple. Green line is the 100 week MA. Pink line is the 150 week MA. White line is the 200 week MA. VIX is still in a long-term downward channel and there are multiple resistances above. Closing above 40 will be a Herculean attempt for the next month or two. VIX still has a ways down. That 200 week MA is very close to a longer term trend line. VIX will likely bounce from there. Do not expect another March 2020 crash. Only the deluded or dreamers expect that.
There are a lot of permabears on social media who are obsessed with the VIX/VX. There is a surge of retail traders going long on UVXY/VXX and think that the market will crash by some anniversary magic. What is the problem? Most of them do not know how the VIX works. Most of them don't realize that they are trading the VX futures and not the VIX. Most of them cannot properly answer the 4 reasons why the VIX/VX rises or fall. Would you trust your money to someone who doesn't understand the mechanics of the instrument? That depends. Would you trust someone to repair your car if s/he doesn't know how a car engine works?
The 4 reasons why the VIX/VX rises or falls...
1. The most obvious is when the expected move is increased. That's commonly mistaken as being "inverse" of ES. The higher the VIX, the higher the implied volatility or the expected move.
2. There is a large amount of call options made by retail and speculators at a unusually fast rate. This is even is more uncommon than people think and it's much harder to anticipate.
3. Large speculators or institutions are hedging for potentially more volatility like elections or the Gamestonk event. Opposite happens when they let go of their hedges.
4. The contango or premium decay. I made a mistake and switched the terms (backwardation and contango) in my head. This is when the VX's monthly premium decays 1 week before the contract rollover date. The VIX could remain the same, but the contango premium decays usually on the second week of the month. Most permabears foolishly call it "fraud" or some trick from Wall Street. It's mainly because they didn't bother learning how it works.
Here is a tip. My lie detector is if that trader could answer why the VIX/VX rises or falls. If they do not answer that, they are very likely lying and going based on emotions... I'm looking at you, Sven Henrich and Twitter bears. A trader who refuses to learn the mechanics behind the market either has a laziness or ego issue. The VIX punishes both traits harshly like my crazy ex-girlfriend.
If the VIX is not clear on what it wants to do, you stay away from it. If you think you can get rich quick from it, don't trade it. Longing VX is a very risky trade and never be held for more than a few days. I haven't longed volatility since September. I've been shorting the VIX spikes since. Why? Volatility doesn't last long at all. Let time be on your side.
This is probably my last posting day for a while as my work days gotten longer. I'm still at the office as I am typing this.
Let's make this simple. Green line is the 100 week MA. Pink line is the 150 week MA. White line is the 200 week MA. VIX is still in a long-term downward channel and there are multiple resistances above. Closing above 40 will be a Herculean attempt for the next month or two. VIX still has a ways down. That 200 week MA is very close to a longer term trend line. VIX will likely bounce from there. Do not expect another March 2020 crash. Only the deluded or dreamers expect that.
There are a lot of permabears on social media who are obsessed with the VIX/VX. There is a surge of retail traders going long on UVXY/VXX and think that the market will crash by some anniversary magic. What is the problem? Most of them do not know how the VIX works. Most of them don't realize that they are trading the VX futures and not the VIX. Most of them cannot properly answer the 4 reasons why the VIX/VX rises or fall. Would you trust your money to someone who doesn't understand the mechanics of the instrument? That depends. Would you trust someone to repair your car if s/he doesn't know how a car engine works?
The 4 reasons why the VIX/VX rises or falls...
1. The most obvious is when the expected move is increased. That's commonly mistaken as being "inverse" of ES. The higher the VIX, the higher the implied volatility or the expected move.
2. There is a large amount of call options made by retail and speculators at a unusually fast rate. This is even is more uncommon than people think and it's much harder to anticipate.
3. Large speculators or institutions are hedging for potentially more volatility like elections or the Gamestonk event. Opposite happens when they let go of their hedges.
4. The contango or premium decay. I made a mistake and switched the terms (backwardation and contango) in my head. This is when the VX's monthly premium decays 1 week before the contract rollover date. The VIX could remain the same, but the contango premium decays usually on the second week of the month. Most permabears foolishly call it "fraud" or some trick from Wall Street. It's mainly because they didn't bother learning how it works.
Here is a tip. My lie detector is if that trader could answer why the VIX/VX rises or falls. If they do not answer that, they are very likely lying and going based on emotions... I'm looking at you, Sven Henrich and Twitter bears. A trader who refuses to learn the mechanics behind the market either has a laziness or ego issue. The VIX punishes both traits harshly like my crazy ex-girlfriend.
If the VIX is not clear on what it wants to do, you stay away from it. If you think you can get rich quick from it, don't trade it. Longing VX is a very risky trade and never be held for more than a few days. I haven't longed volatility since September. I've been shorting the VIX spikes since. Why? Volatility doesn't last long at all. Let time be on your side.