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Here is Why your VXX AND XIV Strategies Aren't Working

One of the things that has been throwing off the VIX, VXX and XIV contango traders has been how the VIX has been moving.  Where in October and December we saw VIX swing back and forth some,  since the beginning of January VIX moves have not involved alot of backwardation.  Instead we are seeing moves in parellel:  esentially the whole curve is moving as one unit.  Take a look at the movement we have seen week over week in VIX:

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The Next Cut is the One that Hurt

The Sheryl Crow song says the 1st cut is the deepest.  This is not true with equity markets and the VIX.  Thus,  while the VIX has not had huge reactions in response to the sell offs of Friday and today,  that doesn't mean that we should assume the market isn't buying the sell off.  Over the past year, the VIX spent ALOT of time in the 11's and 12's.  Durring this period of time a large sell off led to an immediate jump in VIX.  But now,  it is taking the second or even the 3rd move to make IV really pop:

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WTI VIX is Topped Out

After what ammounted to a 2011 type explosion out of the Oil VIX, OIV, it appears that option premiums are starting to back off the highs.  After topping out as high as 66% in Feb,  OIV has been not traded above 50 for 3 days in a row.  The last time OIV was below 50 for 3 days in a row with out a tick above 50% was in DECEMBER.  This points toward what I feel could be a real bottoming in Oil vol premiums.

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So NFP was a big deal!

Surprise, surprise as stocks took a bit of a header today, on get this, a great jobs number.  Yes the number was too good and now interest rates look like they could go up after all.  The Euro and gold responded in kind by plunging to lows of 2015.  Bonds took out some lows for 2015 too. 

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NFP is NBD

 

If January was the month or realized volatility March is turning out to be the dud central for realized volatility.  HV 10 is clocking in around 5% so stocks are barely able to make move from close to close.  The skew is pretty steep keeping VIX higher but for the most part ATM volatility is low.  30 Day IV  is in the 11 handle ATM so there has not been a total collapse but it is getting there.

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Is the oil patch finding a bottom?

This was a strange day in the market when stocks really lacked a sense of direction.  For the most part the tone was down and VIX was up slightly but the volatility futures actually finished down on the day into the close.  There was really a lack of interest more than anything else as the race to NASDAQ 5000 left everyone with an empty feeling.

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Sticky VIX

See what income generation is all about here

VIX is having bouts of self-doubt about halfway through the day the last couple of days.  The 13 handle is acting like kryptonite which repels all VIX declines.  The SPX is in such lofty territory that any pullback is taken as a sign of worry.

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RVX Pointing to More VIX Slack

One thing I like to scan for is what stocks and indexes are hitting 52 week IV lows.  Today, I was surprized to see the RUT on that list.  The RVX (the VIX of RUT) touched a 52 week low today.  While that on its own is not that interesting,  the fact that the VIX is over 2 points above its 52 week low is certainly interesting and might be informative.  Take  a look at the returns for the VIX and RVX over the last year:

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