Issue 61: When the 9-Day VIX is Steeper than the 30 - Masters in Trading Digest

When the 9-Day VIX is Steeper than the 30

Welcome to Issue 061 of Masters in Trading Digest.

This week was filled with volatility so that’s what we’re focusing on. This past Wednesday the MIT Digest Headline read: “The Mother of ALL BUY Signals.” 

We used that headline because the VIX Trading System has shared trading signals since 2013 and was undefeated. Seriously!

We’re not sure how long the streak will last, but that’s not for me to decide.

I included a PDF so you can see the data.

Enjoy the weekend,
Jonathan

THE MOTHER OF ALL BUY SIGNALS STRIKES AGAIN!

Learning to monitor VIX term structure is an invaluable tool in gauging the near-term market sentiment.  

When the VIX curve is steep, it can indicate that bullish or bearish sentiment is on the rise.  

Now we know if sentiment is rising, it can be time to purchase options as they typically increase faster than stocks after a change in sentiment.  

One quantified rule to identify this behavior is based on the slope of the 9-day VIX relative to the 30-day VIX. 

This chart shows the difference between a 9-day average of volatility and a 30-day average of volatility.

The last trade in the VIX9D & VIX30D spread is -1.35.

  • VIX 30D = 31.0
  • VIX 9D = 32.41

-1.35

Often this relationship signals higher options prices when the 9-day VIX is stronger than the 30-day VIX on a steep curve.  This happens because volatility is rising.

The following chart shows the importance of following the VIX term structure.

The purple line:  $SPX
The red line:  VIX9D & VIX30D

To summarize, when short-term volatility spikes market risks are elevated.

When the red line falls, that’s an indication that the short-term VIX measure is trading higher than the longer-term 30-day VIX.

When the curve is steep, bullish and bearish sentiments rise together. This can often signal higher options prices as they typically rise faster than stocks as a result. 

To be successful with options, one must learn how to monitor the VIX term structure.  When it is steep and the 9-day VIX is stronger than the 30-day VIX, it means options are about to get more expensive.

The VIX Trading System monitors all of this for you.

A few thoughts from Jonathan

Since we first released the VIX Trading System in 2019, we released videos documenting the back-tested trading results.  

The results were not indicative of future success, but when you see the same set-ups, yield the same results, over time – your confidence builds.

Learn more in this video which also includes the most recent back-tested results of our VIX Trading System.

Masters in Trading Digest - Issue 61

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HEARD IN OUR DISCORD

The community gets very excited when we see the VIX Trading System BUY signal.

I am so happy the community is taking notice. The future is bright!

How I got my 100 points off of VIX Buy Signal.

FINAL THOUGHTS

WHAT TO EXPECT IN THE NEXT MIT DIGEST

Next Friday, ALL subscribers to the VIX Trading System are invited to join us LIVE with Pablo Lucena. If you have purchased the VIX Trading System at any time since 2017, then you’re invited to this LIVE event which includes continuing education, Q&A, and customer feedback. Make sure to Log in to the Member Portal and Register!

Keep your feedback coming into support@mastersintrading.com. We’re excited to share your feedback along with fantastic suggestions for upcoming issues.

Until then, trade smart and always manage your tail-risk.

Thanks for reading,
Jonathan Rose

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