August 20, 2017

Volatility is Back…So Are We…

We’re back. Or better said, it’s back. That’s right…our old friend Mr. Volatility has once again made an appearance.

Just look at the chart below.

9-30-14 VIX


For those of you who have no idea what I’m talking about the VIX, or implied volatility is back above historic lows. After much research, we know when the VIX reaches 13 or below selling options in the major indices is typically a bad idea. Basically, the VIX below 13 is an options sellers kryptonite…that is if you are selling options on SPY, SPX and a few other highly-liquid underlyings.

But the VIX is once again back above a tradeable level so let the selling begin. Over the course of the next week I plan on selling options on SPY and SPX using credit spreads and puts. I’m leaning towards the downside here so bear call spreads will be my spread strategy of choice.

I also want to sprinkle in a few more trades on Apple (AAPL) and several other highly-liquid options.

One more positive, now that we are able to once again sell options I will be writing frequently again. As I said a month or so ago, I will never force a trade, so when volatility is at historic lows (it has hit levels this low 3 times in 20 years) there really isn’t much to talk about. You pick your spots…much like any bear market and that is exactly what we have seen for what seems like months on end. So, as a result, the trades have been few and far between. And that’s okay…because we all need to realize the cash is a position, particularly when in the midst of a statistical anomaly.

But volatility is back and therefore trading is back. Hopefully we actually stay above historic levels. The constant teases are becoming too much to handle.

Regardless, it’s good to be back

9-30-2013 4-29-25 PM

If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days.

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