How Can I trade VIX in April?
The "Fear and Greed" index has once again fallen back into the "Fear" range
Ordinary investors may easily overlook the options of $Cboe Volatility Index(VIX)$ , reflecting the volatility of $S&P 500(.SPX)$ . It is a cost-effective "hedge" underlying.
Remember the following points:
- Index option trades are all cash settled, so there is no "stock acceptance" situation in Sell PUT trades.
- VIX is the market's expectation of **future** volatility within 30 days, not a measure of current or past volatility.
- VIX options have a "Rule Of 16", precisely 15.87, which is the square root of 252 (the number of trading days in a year). If VIX is at 16, SPX is expected to fluctuate 1% daily; if VIX is 24, daily fluctuations may be about 1.5%; if it is 32, daily fluctuations may be 2%.
- VIX's IV is generally Negative Skew, as most of the time, investors expect it to fall, and the trading volume of PUT is much smaller than CALL (buyer).
Since April, it has been steadily rising, and the recent two-day volume and price increase also represents a step up in panic sentiment.
Yesterday's trading volume also set a new high for this year.
Looking at the VIX changes on April 16, it should have fallen back, but the market pulled back at the end of the day, indicating that the market is not expected to fall back so quickly in the short term.
The CALL of the 18 strike price due on May 22, in the trading on April 16, increased the open interest by 62%.
At the same time, the open interest of 13.5 PUT increased by 50,000, almost doubling, and most of them were Sell, and there were a lot of new open positions for 15-16 PUT.
In short, VIX trading in April is an important part, whether it is this month or the next two months' options chain, may continue to maintain a relatively high trading heat.
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