The VVIX to VIX ratio is at an all-time high, what does this mean and how does it affect our trading? Tune in to hear Tom and Tony go through the numbers!
The VIX is low, but the VVIX is high. This means the market is expecting the volatility of the S&P 500 to be low, but the volatility of that volatility to be high. Investors purchasing cheaper protection in the form of VIX calls has caused this VVIX to VIX ratio to reach its highest point ever.
Currently, the VVIX to VIX ratio is in the 4th quartile with a value of 9.1. This is near its all time high of 10.07, which it made October 11th, 2017.
In periods of, it is easier to have a lower ratio of VVIX to VIX. In times of market complacency, this ratio can be higher. Does this ratio have any effect on our short premium strategies? Study:
- Testing short 16 when the VVIX to VIX ratio was high
- Strangles at 50%
- SPY 2007 to present
Tune in to see how these Strangles compare in terms of Average P/L, Win Ratio and Max loss when executing this strategy at different ratio levels!