Major VIX Action Suggests Volatility Is Going To Decline

1

• OPTIONS TRADING RESEARCH

Major VIX Action Suggests Volatility Is Going To
Decline
2
Welcome to Options Trading Research Your premier
site for news and information on Profitable
Options Trading. For more info on Options Trading
visit our website www.OptionsTradingResearch.com
3

• Get Your Free Report On Options Trading Success!
• Well tell you about this
• Special Offer
• at the end of the video!

4

• Hi, My name is Steve and Im with Options Trading
  Research, today were reviewing our recently
  published article

5

• Major VIX Action Suggests Volatility Is Going To
  Decline

6

• The VIX has been front and center in the
  financial news lately with all the volatility
  thats hit the market the past couple weeks.

7

• The collapse of the Chinese economy is spooking
  investors and adding a sizeable level of
  uncertainty to US financial markets.

8

• As a reminder, the VIX (SP 500 Volatility Index)
  is a measure of implied volatility levels on SP
  500 options. As many of you know, the VIX is
  often considered the markets fear gauge.

9

• Overall market volatility is most commonly
  tracked by watching the VIX. For those who are
  interested in learning more about the VIX, the
  CBOE VIX mini-site has a ton of valuable
  information on the index. Follow the link if you
  want to learn more.

10

• With all the action in the markets lately,
  theres been renewed interest in volatility or
  volatility products. Its true for options
  traders of course.

11

• But, even those traders who never touch options
  may still trade (or at least follow) volatility
  levels. Ive written a lot about volatility in
  the past, and you check out this article to learn
  more about why volatility is important.

12

• With that being said, lets take a look at
  interesting VIX action form this week. It could
  give us some clues as to what to expect from the
  market over the next few weeks.
• Heres the deal

13

• A major VIX put spread hit the tape this week
  expiring in September. More specifically, a
  trader purchased the September 19 puts and sold
  the 14.50 puts at the same time for a total
  premium cost of 0.29.

14

• The spread was done 45,000 times, making the
  total cost of the trade 1.3 million. The max
  profit for the trade is realized if the VIX
  closes at 14.50 or below on September expiration.
  

15

• That would be actual profits of almost 19
  million in the best-case scenario!

16

• Okay, so whats the story with this VIX trade?
• Heres the chart of the VIX

17
(No Transcript)
18

• The VIX is still trading well above the 50-day
  moving average after spiking in mid-August.
  While the benchmark volatility index is off its
  highs, its still trading at elevated levels
  compared to where its been for most of the year.

19

• The trader behind the large September spread is
  obviously betting the VIX is going to come back
  to earth sooner rather than later. If the VIX
  falls to the 50-day moving average, the price
  will be right in the middle of the spreads
  profit range.

20

• So, given the recent history, how likely is it
  this VIX spread will be a winner?

21

• Given how fast the VIX can move, theres reason
  to believe the trader will make money on this
  spread. While I dont expect the VIX to go back
  to 14.50 in the next roughly three weeks, falling
  under 19 is a definite possibility.

22

• Doing a put spread like this where youre betting
  on mean reversion in volatility is generally a
  good idea. While theres still uncertainty in
  the markets, the VIX does tend to revert to its
  mean faster than most equities and indexes.

23

• All in all, it looks like a smart trade.

24

• Want More from Options Trading Research.com?
• Follow us on Social Media

25

• Want more FREE information on Options Trading?
• OptionsTradingResearch.com

Get Your FREE Report Now
26
READ THIS FREE REPORT!
3 New Easy Rules for Options Trading Success!
CLICK HERE