Good article. I agree with his thesis. There is a massive day of reckoning coming. But I'm pushing this further and further out into the future. The realized vix (or stat vol) has been consistently in the 7's. We actually had a 5 print once. I believe this summer stat vol will print 5 again and the VIX will print a 7 handle.
I like this part of the article: "Many traders have written about the fact that the current low VIX is not surprising given the lack of actual movement in the index. But few are able to explain the root cause. Well, here is a thought for you. We all know the Central Banks are becoming increasingly active in the equity markets. And the most interesting part of their involvement can best be demonstrated by the Bank of Japan’s equity purchase program. The BoJ reports their equity purchases after the fact, so we know on which days they have been active. The BoJ has a definite strategy to buy on days when stocks are down on the day. The BoJ does not regularly buy stocks regardless of the price (unlike the scheduled POMO purchases previously made by the Fed in the bond market during their QE programs), but instead, the BoJ waits for weakness and stands in there with blue tickets. This has a massive dampening affect on volatility." ------------------- I think it is also worth mentioning that the Fed suddenly launched QE3 in September 2013 after something like a 7% pullback from all-time highs in the S&P500....in my opinion, it became quite apparent at that moment that the Fed was sending a loud signal that US equity bulls had a free put option on the entire index...the Fed would not allow stocks to fall meaningfully for a long time going forward. If you go take a look at a weekly chart of the S&P500, you'll see that we have never once tested below the September 2013 lows, which I believe is the result of the above. Couple this free put option with an asset management industry that finds its fee structures under intense pressure vs passive ETFs, and it makes sense that some funds would start cutting back on costly hedging programs. Let's not even mention Janet Yellen's comments in 2016 where she said "there are circumstances where the Fed buying stocks could be a good idea." Unprecedented! Decline in fear, leads to a decline in activity, which leads to a decline in volatility, and here we are today....just my theory.
I'm going to write a post this weekend explaining what I think is going on and I'll inject some math into it.
Mav, I am finding selling Iron Fly's on SPX and other liquid indexes/Equities when: OR is => ATR(5) divided by 2.5 or yesterdays range was greater than ATR(5) and then buy it back EOD or with a 15% profit of total premium collected. My number line must also be between -/+ 5. To be profitable. Have you tried this or similar method before? I am also using a volume indicator to see when momentum of volume is slowing which would make an underlying less volatile considering larger volume= higher volatility. I have just finished reading all 1300 pages of this thread and have to say... you are a rare breed. Best Regards Jordan