Wednesday, June 22, 2016

VIX Increases With Elevated Put/Call Ratios

I ran a scan today looking back at times when the VIX increased more than 12% and at the same time, the total put/call ratio was greater than 1.05.

This back test resulted in a significant bullish skew in the SPY options over the upcoming 1-2 weeks.

When I added the condition of VIX/VXV being greater than or equal to 1.0, the results were even more outstandingly bullish.  The results were not much different for bear market versus bull market moving average configurations.

So the implication here is that the market may rebound after the Brexit announcement.

Buying an at the money SPY option with 1 or 2 weeks until expiration, and using limit exit orders of 40%, 60%, or 80% to exit while letting losers expire worthless all led to positive expected values.  Since there are only 2 sessions left this week, I would suggest buying the July 1st SPY 208 call and using the 40% limit gain order would be an appropriate trade.

If further details are needed regarding position sizing, etc, let me know.


No comments:

Post a Comment