The so-called fear index, the CBOE S&P 500 Volatility Index (VIX), just isn’t very fearful right now. In spite of all the negative talk from Federal Reserve officials, Wall Street figures like JPMorgan Chase’s Jamie Dimon, and various and sundry economies, stocks just aren’t showing much fear right now. Oh, sure stocks fell this week but the VIX didn’t show any big rush to hedge downside risk
I vote for the latter–even though I acknowledge that the VIX, the CBOE S&P Volatility Index (VIX), which is supposed to track expectations for short-term volatility in the market, is behaving very strangely lately. The VIX is supposed to climb along with fear in the market as investors and traders step up to buy options and futures, even at higher prices, in order to hedge risk. But even as stocks have struggled in December the VIX has tumbled. It was down another 5.01% today to just 20.87.
Today I posted my two-hundred-and-nineteenth YouTube video: Fear Is Still on a Holiday Today’s topic: Fear is Still on a Holiday. This is a peculiar market for many reasons. Stocks are sinking, but volatility fear doesn’t seem to be rising. On December 20, for example, the S&P 500 fighting a 5-day losing streak. Havens of safety were getting smaller. Pharmaceuticals and airlines, which have been strong recently, sold off on December 19. Searching for glimpses of green, like Coke (up just .14%) in a sea of red is getting harder and harder. What’s curious though, is the VIX, the CBOE Volatility Index, better known as the “Fear Index” remains on the average to low end of its recent and historic range. their recent range. The VIX tracks prices for options and futures on the S&P, so as people, in fear of a downturn, hedge by buying “insurance” against a market drop, the VIX rises. But right now we’re seeing a market that truly stinks–that’s a technical term, I know, but you can Google it–while the VIX remains low, showing little sign of fear. My explanation is that at the end of the year, investors aren’t looking to hedge against a market they still hope will turn around. The VIX is an interesting short-term play here. Buying a Call option with a 60-day out as the market returns to fear, or rationality, in 2023 could be the way to go. I’m going to check on the up-to-the-minute price action and see if the Call option is attractive here. Look to my paid JubakAM.com and my free JubakPicks.Com sites on Friday for a buy or not.
At 2:20 p.m. New York time today, December 1, the Standard & Poor’s 500 traded at 4074. That’s just slightly above the 200-day moving average for the index of 4048. Yesterday, the S&P 500 closed at 4080. The 200-day-moving average was at 4050. Yep, once again, we’re seeing a struggle to break through technical resistance near the 4,000 level.
I’m not putting on any leverage bets on market direction at the moment. The trend is just too “trundles.”
This week’s Trend of the Week asks Why, despite all the turmoil in the markets, has the CBOE Volatility Index–also known as the VIX, or the “Fear Index,” remained so low? I think this should signal to us that the market has not currently worried in the near term about long-term problems it knows are coming down the road, like rate hikes and a recession at the end of 2022 or in 2023.. In the VIX’s short-term view, there’s no need to worry. Time to put a call on the VIX?
Today, stocks fell but not a huge amount on uncertainty about exactly what sanctions the United States and the countries of Europe will impose on Russia. So far, the reaction seems to be one of “disappointment” that the announced sanctions aren’t bigger.
The CBOE S&P 500 Volatility Index (VIX) is up another 8.87% today to 27.83 on another drop in stocks and continued worry about the effect of looming Federal Reserve interest rate increases. Today I’m going to sell the February 16 VIX Call Options with a strike of 20 (VIX220216C00020000) that I bought on December 31, 2021 in my Volatility Portfolio. I bought those Call Options for $380 a contract and I’m selling today, January 21 with those options trading at $710 a contract as of 2:45 New York time. That’s a gain of 86.8% on this position in roughly four weeks.
As of 11:15 a.m., the market is tumbling and the VIX “Fear Index” is up 15.79% to 22.22. My January 26 VIX Call Options with a strike at 20 (VIXW220126C00020000) have soared 61.11% to sell at $290 a contract. With the expiration date of January 26 approaching I’m selling this position today.
The CBOE S&P 500 Volatility Index (VIX) hasn’t moved much so far in today’s session. The so-called “fear index” is down just 0.23% to 17.26 as of 3:20 p.m. New York time. But there’s been strong action in the options market with risk hedges for the end of January and the middle of February showing losses. I’m going to use today’s selling to buy two VIX Call positions in the Volatility Portfolio.
At the close today, the VIX–the CBOE S&P 500 Volatility Index–had gained 2.24% to 17.33. During the day it had dropped as much a 1.53% to 16.69. That’s a level that I find interesting, again, as a play on potential volatility in January.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My eightieth YouTube video “Trend of the Week: Ten-Year Treasury Notes are Tracking Volatility” went up today.
