These are difficult times to trade volatility with a high degree of certainty, given that the range of VIX and 7 months of VIX futures is only 2.05 points (17.15 to 19.20). The compression represents a lack of direction and takes away the ability of traders to use the roll yield of VIX ETPs to their advantage. This can be observed on the right hand side of the chart showing 7 months of VIX futures, below (from
VIX Futures Data page):
I
noted yesterday that
"there is a good probability that [the VIX] will retrace some of those gains tomorrow but by no means does it have to, and a spike today does not rule out the possibility of another spike tomorrow." After today's action I think the same thing can be said for Friday's outlook as well. Staying in cash until we get through this choppiness can be a great decision.
VIX has closed above front month futures for 4 days in a row now so risk remains elevated. Forecast for 4/19:
-JW
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