Posts Tagged ‘credit spreads’

My Newfound Love for the VIX

There’s always calm before the storm, right?

I didn’t learn that from a movie, I learned it in Florida. After dealing with so many hurricanes, you begin to appreciate the calm right before the hurricane’s effects are felt.

With that knowledge in mind, it’s pretty easy to tell when the markets are too calm. Typically, the VIX index hovers in the low 20’s. And if you are savvy enough to buy a call option at that point, then you’ll be rewarded when a sell-off pushes the VIX back up to around 30.

That’s what I did during the last sell-off, and made a pretty penny. It’s also what I’m doing now to take advantage of the next sell-off.

Oh, and if you really have balls of steel, you can buy a put option on the VIX once it’s around 30 and make some cash as it drops.

Now you see why i love the VIX so damn much. It’s almost as simple as credit spreads.