Besides the Weekly options, the VIX is the best new product in a long time since the SPX. It spawned a whole other class of ETF’s and made all the old time Cboe seat holders a few extra bucks. The Bitcoin future and options will be out soon which might outshine them all. But really I want to talk VIX today.
We are stuck in what I call Zone 1 which is the meandering path of VIX from 9 to 13. It is tough to get out of Zone 1. VIX futures grind away everyday so the cost for long VIX buyers is pretty high. One can spend a lot of money on VIX call spreads and not get very far in Zone 1. Why? Mostly because VIX options trade off of the futures and not the VIX cash. It like a product with a different underlying every week so duration selection is crazy important. Zone 1 trades a bit differently than, say, Zone 2. The nature of VIX changes per Zone.
We are now in what I call a “normal” volatility market. If anything we are light on seasonal VIX Dec premium which makes VIX hedging cheaper for the cycle. The little lift in IV last week could make short term Iron Condors in the SPX or RUT a bit more interesting with a VIX hedge. Buy the cheap thing, sell the expensive thing.
Take our Easy VIX webinar for free on Thursday. It will make you approach VIX differently and shed some light on a few things. Click here
Disclosure: VIX positions in the fund I manage risk for, Karman Line Capital, LLC.