I am not normally one to brag (wait, yes I am), but so far, the front end of my thesis from yesterday is righ
Today, as the VIX rallied past 20, the cash VIX and August future began to enter backwardation:
I have a really bad feeling on the state of the market. Take a look at the slow lift in volatility since June 1st, and then take a look at the slow rise in the market:
I’m writing this mid-day as I am on vacation this week. However, even at mid-day I am noticing a few trends in volatility that developed last week, persisting.
At the beginning of June when the market had its first of several major down days, I made note of the fact that the market was a major net seller of premium.
From time to time we like to take a break from our normal in-depth analysis of the option-sphere and bust a few myths proliferated by many of my dishonest counterparts in option education. I debunked the myth that 10% a month is realistic (it's not). I debunked that trading the same trade every month works (it doesn’t). I debunked that risk management is more important than trade selection (it isn’t). Well it’s time to go after something else
Since the market had its 30 point sell off at the beginning of the month, many of my option mentoring students have lamented how poorly the VIX has correlated with the fall in the market place.
While I do not think anyone would call today a fearful session on any level.
The VIX may have gained a little more than 1%, something those in the media will point toward as an increase in fear. As I look at volatility I do not seem much of an uptick at all.