Why I'm not buying VIX here yet
When VIX beta collapses, that usually suggests VIX is a buy.
However, that setup only works if VIX actually catches a bid when the market sells off. Right now, we're not getting that.
We had a bit of a sell-off in the last week or two and VIX did nothing.
Normally when VIX beta collapses you'd expect the next sell-off to produce a vol spike. We just got the sell-off and the spike didn't show. That makes the buy harder to justify here.
It's a strange setup. The collapsed beta signals asymmetry on the long side. The price action on the down days says wait.
So I'm waiting. My conviction on buying too much VIX here has dropped until I see VIX actually trading better on the way down in spot.
Sometimes the trade is patience.
Reading VIX behaviour across regimes is one of the things I made a career from. When the beta is telling you something, when the spot reaction is telling you something else, and how to weigh both before you commit.
As a starting point into how I apply my framework, check out the link below:
Imran
Disclaimer (Your Gains & Losses, Your Responsibility): This content from Options Insight LLC (“Options Insight”) is for educational purposes only and does not provide individual investment advice or recommendations, nor should it be considered an offer to buy or sell any security. All information is general and not tailored to your specific objectives, financial situation, or risk tolerance. Employees of Options Insight may hold positions in the assets discussed. While we use sources believed to be reliable, we are not responsible for errors, omissions, or losses resulting from reliance on this content. Always consult a licensed investment professional.
Liked this? Imran writes one every market day. Get them direct to your inbox.