Volatility Takes a Crushing Blow

As we watched the developments around the election unfold Tuesday night volatility rose sharply, vix futures pushing up toward the 27 level.  At that point the SPX futures were limit down, off an amazing 105 points, Dow Industrial futures off over 800 points.  Certainly the results were being taken negatively as everyone seemed gripped and ready for a tough trading day Wednesday.  The assumption was a Trump victory would punish markets around the globe.

But as always, markets make prognostications such as this one laughable.  I saw so many predictions of a Clinton win out there, and even the wildest guess of them all - Trump  would withdraw from the race before the election. Laughable, but I guess some just want to be outrageous.  If you listen and invest relying on this stuff you deserve to lose your money!

In the wee hours of the morning (no, I was still sleeping) we saw volatility collapse, and when the markets opened down 1% the VIX was actually negative, and proceeded to plunge all day long.  Markets rallied sharply on that day and ended the week with the Dow Industrials and Russell 2K at all time highs.  This fall in volatility was telling and should have been a clue toward markets rallying higher.

Is the easy money made?  VIX is down near 15%, and we have a holiday coming up soon - where we often see volatility sold down hard. 

Is there is a message here? Most certainly, as always - listen to the market and pay attention to the action, rather than listening to the pundits and talking heads.  They will never guide you honestly as will the market. 

Founded in 2011 by Bob Lang, the industry’s leading technical expert, we provide proprietary options trading knowledge to people who are committed long-term to trading. If you want to learn more about options trading and grow your portfolio, but don’t have the time or knowledge to do it full-time, Explosive Options is for you.



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