VIX, VIX Futures Are Finally Compressing
While we could sit and debate by how much the VIX is overpriced, and whether it should be trading below 10 (maybe it should), one thing we can't debate is where forward values are pricing VIX movement. Forward values, represented in the futures, are the smart money's guess as to where volatility is heading. The answer is, at a minimum, nowhere, and could be down. On a day when the VIX managed to eke out a small gain, take a look at what the VIX futures curve did?
that's right, despite VIX moving a touch higher, futures compressed, moving down much harder than VIX moved up. This could point toward what might end up with an expiration of VIX around 13.00 or so. The spread between Feb and Cash is really starting to compress
The compression will cause the VIX futures to fall, and possibly the VIX cash to creep higher. Especially if we get some interesting earnings out of AAPL tonight, or one of the other major players reporting this week. Overall, the entire curve is now trading below 20%, which means not only is the market in a low volatility cycle, but that we might be here for sometime. As i stated last year, on Mad Money, I think we are entering a period of lower volatility.
There is a reason VXX got hammered today...and will continue to get hammered. I think VXX has a 4 for 1 split in its very near future....again.
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