NaughtyPines

THE "VOLATILITY CYCLE" -- WHAT'S IN STORE FOR NEXT WEEK

INDEX:VIX   CBOE Volatility Index
Volatility in the broader indices has been on the ebb all week. What does this mean for premium selling? Well, it means that the premium in index ETF's like SPY             , IWM             , QQQ             , and DIA             is less rich and therefore not as attractive for selling premium. Ordinarily, when this occurs, I turn my attention somewhat away from broad market index ETF plays or plays in instruments like RUT or SPX             to sector SPDR's that may have greater volatility than that present in the broader market; to individual underlyings which are experiencing their own high volatility , usually surrounding earnings ; or to low volatility environment options strategies like calendars that benefit from expanding volatility .

Additionally, my tendency is to do more small, high probability of profit percentage, short-term plays (like the 80% POP Feb 29th RUT IC             I put on this week) to keep my buying power engaged for short periods while I bide my time for an uptick in general market volatility where I generally want to put on stuff that is substantially farther out in time (45 DTE             being the sweet spot).

So, unlike this week, where I was scrambling around trying to put on broad index plays as volatility was sliding out from beneath me, next week I'll look at individual stock earnings more closely for plays and anything else that pops up on the Dough grid as having 70 implied volatility rank or more to play while my March index ETF stuff plays out.

Naturally, as we've seen over the past several weeks, the general market's implied volatility can change in a heartbeat, so if VIX             is up again next week, you'll see me posting index ETF setups again and passing on the vast majority of earnings plays. That's just the "volatility cycle" ... .

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