22.53. That was the close on the CBOE S&P 500 Volatility Index (VIX) today, Friday, May 9.
It’s safe to say that stock market volatility is way down.
Back on April 21, the “fear index” was at 34.21.
On April 8, at the bottom of the turmoil that followed on the April 2 tariffs, the index hit 52.33.
But even before that spike, fear had been climbing among investors to 27.86 on March 10 from the very complacent 16.43 on January 31. That was substantially below the 10-year average for the VIX at 18.66.
So now the question is how low the VIX will go. And when will it be time to buy VIX Call Options again on a bet that volatility will return.
This isn’t merely an academic question.Back at the end of January I bought VIX MAYCall Options with a strike price of 21. I sold those with a gain of 140%. Second set of options purchased later gained only 40% and 6%, respectively, before I sold them at the end of April.
Needless to say, I’d love to repeat those trades. And looking at the likely volatility calendar for the summer, it’s clear me that this is likely to be a profitable trade again.
It’s only a question when to buy. I say, Not yet. But soon.
