Options trading report: Today the VIX, traded below 20 for the first time all year.
What does this mean? It means that the markets are calming down almost back to normal, that volatility is coming out, that wild price swings in the stock market won’t be so large, and that option premiums won’t be so juicy.
Lookout for these signs
But overall, a low VIX is fine with me. I don’t like all the wild price swings. A couple years ago there was a saying, when the VIX is high, time to buy. When the VIX is low, look out below.
When the market drops, VIX moves up and if it gets too low, the market will correct by dropping.
I don’t know how much lower it will go, but I feel it will stabilize somewhere in the area around 20. For the last couple months, it has traded between 20 and 30. A good options trade has been to short the market when the VIX hits close to 20 and buy when it gets to 25. That trade might be over. But I do not expect to see it go much lower. That means the market might pull back this week.
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