Whats your reading of VIX at this point? Bull or bear? Thx

I have a paper related to Excess volatility below. I am thinking it may be used with VIX in a framework to create profitable strategies.

Wang Y., Ma J. Excess volatility and the crosssection

of stock returns. The North American Journal

of Economics and Finance, 2014, vol. 27, pp. 1–16.

Downloadable from

http://www.sciencedirect.com/science/article/pii/S1062940813000788

What's the vol like on the weeklys? My understanding is that most trading still happens on the monthly contracts. Would eliminate all but the smallest shop from utilizing this at the moment.

Stuart, the VIX has never proven to be a good indicator of volatility a today's price is a good example. The construct of the VIX makes it a laggard at best and not a predictive tool. I have monitored the trading pattern for years and VIX understates downside vol. As it risk indicator VIX has failed and sophisticated investors understand it is a marginal tool.

Does this only work for the futures market ?

Implied Volatility is a FIRST CLASS underlying price predictive measure for ANY instrument on ANY timeframe. The VIX is second only to price in usefulness for predicting underlying SPX price on ANY timeframe. The Vix is neither a measure of expected future volatility nor a fear and greed measure. Read Einstein's piece, "Investigations on the Theory of Brownian Motion" and Black and Scholes, "The Pricing of Options and Coporate Liabilities" paper. The Nobel prize winning insight in the paper is lost on so many people. Do you want to see FUTURE long-term and short-term price movement? It is embedded within the IV. Cases in point. I recently posted on my twitter account, https://twitter.com/CronusMaster : real-time buy Spx@2094 on 11/04/2016, 182 Spx points in or 8.4% in 1 calendar month; real-time buy Spx@1874 on 1/15/2016, 402 Spx points or 21.5% so far in 2016. Both are still active.

I have never been happy with IV as far as how it is calculated, It lags too much for me. I am hopeful one day I could completely overhaul IV calcs and make it much better but given there is nothing better right now it's the standard. Just wish the standard was better.

Vix and it's brothers have been in my model group for a couple of decades and I have high winning percentage system that use it as an engine. However I have models that also perform just as well and in many cases better just using the price action only of the SP and nothing else. So I just stopped working and looking at anything Vix because of this.

I have also had great success with OddLot and Put Call Ratio type models worth looking at in my opinion.

First, Implied Vol is different from VIX. IV and Vix have zero lag, and both are leading measures w.r.t. price. The B-S paper, mentioned in my previous post, reveals only part of the big Aha. I previously mentioned that the IV of the option on an underlying is a price predictive measure on any instrument on any timeframe. A "Vix" type measure can be computed for any instrument with liquid options. Comparing the regimes of the IV and Underlying is a key task in predicting price.

John - predictive to what extent? For me, the only way I can agree on this statement is that a high IV is predictive of a future low IV. And, that although I don't have any data to base this on, my hunch tells me horizontals/other short vega plays outperform their strangle/straddle counterparts. Let me know if I'm right or wrong on this.

My gripe with using VIX options at all is that speculating that the VIX will increase is saying 2 things: 1) You expect the volatility index to become volatile - which in the case you are right, pays you zero in vega because it's about as smart as it sounds - and 2) betting that the herd of portfolio managers are too bullish and 'fearless' places the VIX buyer in the tin foil hat community shouting 'the end is nigh' alongside Michael Burry.

And, if the VIX buyer does so because "The VIX always spikes eventually", then he is just naive and dumb, because The VIX does always spike eventually and you will be getting zero vega and only a tiny window to exit with your delta, while theta can wipe you out completely before you can even get that chance. Basically, it's such an obvious bet that it has terrible payoff.

And it's all of these above points that make a VIX hedge a highly under performing hedge - vs OTM put butterfly on the DIA or SPY when IV is low.