What the VIX tells us Below 10

Wall Street’s “fear gauge” plummeted to a 24-year low of 9.31 in late July 2017, stoking concerns that traders had become far too complacent.

While many don't pay attention to such a gauge, as markets rally, it’s well worth paying attention to. You see each time the VIX has closed below 10, we’ve seen big spikes in volatility shortly after. In fact, the last time the VIX closed under 10 in late June 2017, the VIX exploded from a low of 9.75 to 13 in days, resulting in a pullback in major indices.

If you can spot potential spikes, there’s an opportunity to make money.

For one, each time the VIX falls under 10 traders bet on a near-term spike. In fact, in July 2017, one trader bet millions it would happen again. He or she bought nearly 260,000 call options that expire in October 2017. If correct, that trader could collect as much as $265 million in the next three months.


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Chances were good it would pay out well, too based on history alone.

Two, when we begin to see the VIX sub-10, there’s a good chance the major indices could pull back as well, offering a second opportunity to make money.

In early May 2017, we noted much of the same. The VIX hit a low of 9.57 and we suggested it was only a matter of time before the VIX exploded, which it did. Not long after it jumped to more than 15.71, as the Dow fell from 21,000 to 20,600.

Fear exploded. Panic resumed. Any one that was positioned for the potential spike in volatility did quite well. Any one not aware of what the VIX was saying, missed out.

The other thing to be well aware of with the VIX is the technical pivot points.

Look at what especially happens with the VIX challenges the lower Bollinger Band with oversold confirmation from Williams’ %R. It bounces. We’ve seen this happen countless times between 2016 and 2017 for example.

Now look at what happens when the VIX challenges the upper Bollinger Band, confirmed with an overbought read on Williams’ %R range. It stops and pivots in the other direction.

Bottom line – if you want to get a jump on volatility, keep a close eye on the VIX.


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