As of the time of this writing, the VIX/VXV ratio stands at greater than 1.1. Anything higher than 1.0 is a notable imbalance in the volatility in the options.
The VXV only has a history going back 8.5 years to 2009. So it does not include the 2007-2009 bear market environment. But during this bull market, the periods of extreme elevation of the ratio above 1.1 have been near to bottoming points and sharp rebound rallies.
Late July 2011, early Feb 2014, Oct 13th 2014, and August 21 2015 were the dates that came up where the ratio FIRST closed above the 1.1 level. It was a couple days or so until the low was in.
Other than the Feb 2014 instance, the others ended with very large gap downs into the low.
So what we may anticipate here is a couple further volatile days with lower lows than today, and possibly a "wipeout" type gap down this week which will have potential for a sharp short to intermediate term rebound for prices to follow.
Given past similar scenarios, a call option purchase of 3-5 days duration from the time of an oversized gap down opening could be a nice speculative play.
If I see an upcoming high probability play and big gap down opening, I will post here with ideas.
Pete
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment