Is it really that quiet out there?

I don’t think so. High beta tech stocks have been getting hammered, and there’s been significant rotation out of growth and into value.

You would think that the market would be a little more scared, that investors would be buying protection as we head into the summer.

But that’s not what we are seeing.

The traditional “fear” index is the VIX, which measures the supply and demand for SPX options. With a reading of 13.71, it puts it in towards the lower end of its six month trading range.

But let’s go down the rabbit hole just a little more.

The VVIX measures the supply and demand for VIX. I feel that this chart is just as important as the VIX because investors are not just using SPX puts to get protection– they’re now using VIX calls.

vvix.jpg

The current reading in the VVIX is in the 65’s, which puts it almost near six month lows.

What does this mean? Very few people are using the options market to protect themselves. And you think that they would, with FOMC minutes due out, along with jobs numbers and economic data.

The trade here is to get long “vol of vol.” That simply means buying straddles (a combination of a call and put) on the VIX or VXX before the fireworks start on Wednesday afternoon.

If we get a ripper of a rally, the VIX will tank further, and if things start getting ugly, the VIX will spike. The only bad outcome would be a non-move, but given the way the market’s been trading, “movement” is a high odds bet.

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Read another option story plus much more  in the Spring TraderPlanet Journal.