bets for single digit vix

kalman · Post by **kalman** » Tue Apr 25, 2006 9:35 am

shavinOccam,

Any new thoughts on VIX? The fast-approaching Security Council deadline for Iran seems to me like it could be the catalyst for VIX to break its long-term downtrend.

FDAXHunter · Post by **FDAXHunter** » Tue Apr 25, 2006 10:10 am

Why would shavinOccam have any thoughts on this? He doesn't work in equity derivs. Besides, he hasn't been here for like 3 months after he made an ass of himself in a credit analysis thread.

The only thing that would catapult the VIX up is a massive sell-off of stocks. A UN resolution against Iran isn't going to accomplish that. Sure, oil's bound to get more volatile and that will have a small spillover effect into equities... but how much is that going to amount to? Certainly not that much, in the breadth of the market.

Political markets never last long.

ynot · Post by **ynot** » Tue Apr 25, 2006 12:27 pm

Maybe he created a new member id? He's done it before.

kalman · Post by **kalman** » Tue Apr 25, 2006 4:29 pm

Whoa there. One does not need to work in equity derivs to have "thoughts" on VIX. (And you might cynically say that this being true is a source of profit for those who do work in equity derivs.) I wrote "thoughts," not informed professional opinions. As for why he might have any thoughts on this - he thought about it before, at least to the extent of starting this thread. I didn't know that he has been gone for 3 months. Do you work in equity derivs?

A UN resolution against Iran might not by itself result in a massive sell-off. But, I think there are things that Bush and Ahmadinejad might say after the Friday deadline that could have this effect.

But, as with most things in the future, I am not sure, so I use "could" and "might." You seem much more certain about the future.

FDAXHunter · Post by **FDAXHunter** » Tue Apr 25, 2006 4:45 pm

Yeah sorry, I'm just a bit allergic to our Austrian monk friend (and don't think I'm alone in that department).

I seem more certain about the future because I remind myself that history, as Mark Twain said, "doesn't repeat, but it sure does rhyme". So, in some way, shape or form, we've seen all this before. And if anything is to be learned from that (I repeat myself) is that political markets just don't last that long.

So, to give you my "professional opinion" (which means phuck all, really): No, I don't think Friday's resolution (should there even be one) will act as a catalyst (your words, not mine) for an break of the VIX range. We might break that range, but not until later in the year. Much later.

Looking at my system, the market seems to agree with my sentiment.

kalman · Post by **kalman** » Tue Apr 25, 2006 5:18 pm

I'm not expecting a break of the range on Friday. I wrote "it could be the catalyst for VIX to break its long-term downtrend." A break of the trend, not the range. The downtrend could be broken sometime in the weeks surrounding Friday without a break in the range until considerably later.

As for history - I certainly recall a period of time prior to the 2nd Iraq War in which remarks by Bush and Hussein helped VIX to march steadily higher. But, of course, there are many things different about the current situation. I guess we'll just have to wait and see what happens.

FDAXHunter · Post by **FDAXHunter** » Tue Apr 25, 2006 5:33 pm

Semantics... a break of the trend would by definition have to be plesiochronous with a break of the range, wouldn't it.

Let me ask you this if you don't mind: Are you long, short or reasonably flat near-term vol (or related exposure)? I'm slightly short.

Waiting is good, but anticipation is better. Things seem to be looking good in equity land at the moment and even a rising oil price seems to have no impact on either business sentiment or prices. I'm willing to bet that this will extend beyond any mess they start (or don't start, but I'm not very optimistic there at all).

kalman · Post by **kalman** » Tue Apr 25, 2006 5:59 pm

Well, generally speaking, you could break a downtrend without breaking the range by just moving sideways. Here I'm taking a downtrend to mean that you can draw a downward sloping line connecting the highs that is not broken by the price. Of course, this is not completely unambiguous because you'll get different lines depending on which particular peaks you choose. My basic point is that I'm making a weaker statement than saying that VIX will make an upside break of its range.

I prefer not to talk about my positioning, though, of course, the position most consistent with my view would be to be long vol (or flat, if I think VIX is going to break its downtrend by going sideways for a long time - and yes, my views are somewhat vague - my views are vague because I'm pretty sure that I don't know what will happen in the future). I'm more inclined to be long vol at the moment, but I'm pretty flexible, so I could well change my mind (perhaps even more than once) as the news comes in.

FDAXHunter · Post by **FDAXHunter** » Tue Apr 25, 2006 6:10 pm

Well actually, "generally speaking" a downtrend is not only lower highs, but also lower lows - hence the idea of "going down" (and not just contracting in range, which is what your definition of a "downtrend" also implies and which is what the VIX has been doing... and trust me when I say this: It's at odds with the rest of the world's understanding of "downtrend").

Anyway, I didn't come here to discuss semantics, which is what you seem to want to do (but yet seem to fail), so I'll leave you to your vega, whichever way around that may be.

Yeah, you definitely don't want to disclose positioning. Heaven forbid your name might actually be Phil T. R. Kalman.

Ciao.

kalman · Post by **kalman** » Tue Apr 25, 2006 6:20 pm

My definition of downtrend is a fairly standard one in technical analysis. See, for example:

http://www.stockcharts.com/education/ChartAnalysis/trendlines.html

"A downtrend line has a negative slope and is formed by connecting two or more high points....As long as prices remain below the downtrend line, the downtrend is considered solid and intact."

So, no, I don't trust that "it's at odds with the rest of the worlds understanding of 'downtrend'"

Look, that's fine with me if you want to ascribe a different meaning to "downtrend" than what is standard in technical analysis. What's important here is that I have defined what I mean when I say "downtrend" so that you can know what I mean. And, again, I'm not saying that VIX will break out of its range in the near future, but rather something weaker than that.

Defining terms is simply a part of communication - would you prefer to misunderstand someone than to take the time to establish definitions?