I’ve seen a few posts discussing the difficulty of trading in the low IV environment. While I totally understand the perspective, I want to offer a few thoughts to those traders.
First, VIX is regularly sub $15, over 30% of the time from origin in 1990. What we’re seeing now is nothing novel. Even VIX below $12 occurs around 10% of the time.
More importantly, if you’re struggling to find trades now it highlights a massive gap in your trading approach and a huge opportunity to better develop your skillset. There are still plenty of short vol opportunities, they simply look different:
-Earnings plays
-Economic releases
-Anything inflation related
-Phase trial releases
-M&A news
-IPOs (which have also been slow)
-Boeing when the next piece of news hits and yet another passenger gets sucked out a faulty window and the subsequent whistle blower “dies of natural causes” three times in a row
-Comodity production cycles
-Etc
While there are lots of volatility specific opportunities, I’d encourage these traders to go one step further and explore some directional trading. This year has offered incredible opportunities to trade the rotation of sectors from Tech, to Materials, Energy, and Utilities. I’ve traded many of these and individual companies within these sectors via things like ratio call diagonals. Cool enough, it looks like we’re starting to rotate back into tech as inflation continues to remain sticky and the rate cut prospects continue sliding out in time.
Other ideas working well this year: pairs trading sectors and the finally normalizing bond/market relationship, metals, etc.
This year, like most continues to offer plenty of opportunities. It’s our job as traders not to complain we don’t get what we want but to see what the market is doing and find how we can capitalize on it.
Good luck!
Posted by esInvests