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Market volatility has been a hot topic lately. While some people have been having great success with volatility products such as VXX and XIV, others kept warning everyone how dangerous the nature of these products is, and how the market is overheating. Regardless of dozens of commentaries and articles written on this topic, I am about to look at a simple, but telling data which might give us some clues on the behaviour of the stock market.

In the last six years we have witnessed an increase in market volatility on August and September:

2011 – market swiftly went down in the beginning of August.
2012 – market gains started fading in the end of September/ beginning of October.
2013 – market dipped in August.
2014 – market dropped its gains in the end of September.
2015 – market started to tumble in the middle of August.
2016 – market slid in the middle of September.

So is volatility about to be back in August or September?

Everyone is smart enough to see VIX in its historical lows and understand that this will not last forever. But what other parameters could possibly indicate volatility coming back soon?

It is worth mentioning that in September, there are a few important events that might spark volatility in the markets: ECB press conference , FED rates decision, etc.

VIX Put/Call Ratio

VIX Put/Call Ratio might be pretty indicative of volatility spikes. As mentioned above, in the past six years, there was an increase in volatility occurring in August and September. Let’s see if VIX Put/Call Ratio has predicted this happening.



Obviously, before the markets got tumbling, VIX Put/Call ratio was at lows, suggesting upcoming spikes. Consequently, this year is not an exception because VIX Put/Call bottomed in late July and started to rise heading into August. Is it about to predict the next market dip? Instead of guessing, lets look further.

S&P500 Rolling Standard Deviation

1 - month rolling Standard Deviation

 Let's look if Standard deviation of SPY was a good indicator of upcoming volatility in the index.




As you see, I have marked each year’s standard deviation’s dip to its lows, which was a good indicator of upcoming short term market volatility. This year’s standard deviation of SPY is at lows again.

3 Months Rolling Standard Deviation




With this graph, I wanted to show you that the recent 3 - month rolling standard deviation is not only at lows, but also sits here for an extended period of time. Moreover, I have noticed such a phenomenon in the maturing market before the big recession in 2008-2009.



Conclusion

To summarize, it is very likely that volatility will not stay at low levels for next few months. 

Meanwhile



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6ne9 gerai pavarei. Dbr gailiuosi kad neshortinau nuo pat virsaus s&p500, bet nors kazkiek punktu pasidariau. Ziuresim kas toliau

North Korea is "carefully examining" a strike on the U.S. territory of Guam after President Trump warned of "fire and fury" in response to further threats from the regime.

Intelligence reports are suggesting Pyongyang has successfully developed a "miniaturized nuclear weapon" and has "up to 60 nuclear weapons" in its arsenal.

The geopolitical tensions have sent global equities into the red, while safe havens climb, including gold and the yen.

U.S. Futures: Dow -0.1%. S&P -0.3%. Nasdaq -0.5%.

Europe: London -0.9%. Paris -1.2%. Frankfurt -1.2%.

Asia: Nikkei -1.3%; Shanghai -0.2%; Hang Seng -0.4%; Sensex -0.5%.

Gold +0.9% to $1274/ounce, while the dollar is 0.5% lower to ¥109.73.


Jeigu taip ir toliau, bus proga VXX pagauti islipant is volatility stopo, o veliau short short

Na ka, metas dairytis, kuriam taske XIVá pasiimt

Vakar sesijos gale bandziau UVXY, TVIX sortinti - neleido.
Pasortinau VXX. Kiekis nedidelis, ~2% nuo saskaitos.
Jei dar VXX lips i virsu, dar 2 - 3 VXX sortus dadesiu.

XIV duoda tą patį exposure į volatility, tik tiek kad shortinant VXX, tam kad išlaikytį tą patį shorto dydį (leverage), tau reikėtų prie pozicijos pastoviai pridėti naujų shortų, kuomet su IV tu visad išlaikysi tą patį exposure.

Pajudejom ir pramusem 2432.75