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Macro Investor
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I was trained in finance, but work in strategy. I invest very infrequently, and balance my portfolio once a year. I buy and hold hold indices and volatility ETFs. I trade a little bit on the side, but that's pure gambling, for fun.
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Too Big To Take
  • What Just Happened? 23 comments
    Jul 17, 2014 9:34 PM

    VIX rose 32% today (7/17). Impressive.

    First there was the plane, then there were the tanks. I bought VXX puts on the first spike, and sold for about 25% gain. I again bought VXX puts on the second spike, and got creamed.

    So I bought more, and now at the end of the day I am flat.

    What just happened?

    Well, this was a 5-sigma event. In the history of the VIX, there has been 13 days where VIX went up 32% or more. 13 days. Out of some close to 25 years of trading for the VIX. Odds of 0.2%.

    In 9 of these days, next day VIX fell sharply by average of ~15%. In another 3 days, VIX was up by a max of ~1%.

    But yes, there has be one case where vix rose 30 some percentage points in one day, and another 20 some percentage points the next day. That is 1 in 6500. Some odds.

    So I am boldly predicting that tmrw 7/18 VIX will fall by 10-15%, VXX by 2-3%, and my puts will go up by 50-60%.

    I feel bad to profit from human misery. But there it is.

    Best of luck everyone for tmrw.

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Comments (23)
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  • Stanford Chemist
    , contributor
    Comments (401) | Send Message
     
    I have an alternative theory. The VIX spiked because I bought VXX puts at noon today the first time in my life (also a 5-sigma event?). **** me and I am sorry for ruining your trade. I hope you're right about the coming days.
    17 Jul, 11:44 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » Sold for 76 cents for a nice 26% profit over a day. Like shooting fish in a barrel.
    18 Jul, 09:44 AM Reply Like
  • Stanford Chemist
    , contributor
    Comments (401) | Send Message
     
    Thanks MI. I'm still underwater on those Aug 1st puts (followed you at 90c). What's your suggestion?
    18 Jul, 09:53 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » Wait till afternoon. But I don't know if I would hold over the weekend.
    18 Jul, 09:55 AM Reply Like
  • Stanford Chemist
    , contributor
    Comments (401) | Send Message
     
    Thank you sir.
    18 Jul, 09:56 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » You should be good now, right? I would have felt real bad if you followed my lead and then lost money!
    18 Jul, 12:23 PM Reply Like
  • Stanford Chemist
    , contributor
    Comments (401) | Send Message
     
    Yes sir and thank you sir!

     

    Your articles have made me more money than even if I'd have lost yesterday's put completely, so you don't have feel bad at all. So thank you once again!
    18 Jul, 12:32 PM Reply Like
  • Michael Nau
    , contributor
    Comments (972) | Send Message
     
    Not sure if % change in the VIX is the best way to measure volatility spikes- its a percent of a percent, which is weird. Maybe vol of vol is better.

     

    Or maybe it is better to think qualitatively: yesterday the VIX went from extremely low to very low relative to the historical mean. I would guess that most of your other 5-sigma events are similar and don't correspond to a commonsense idea of a true crash or black swan event.
    18 Jul, 10:27 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » The other events were not similar. Some cases the VIX went from 15 to 18. In other it went from 30 to 42. It is the increase in panic that is reflected in the rise. VVIX doesn't have historicla data (or at least I couldn't find it), but I agree that looking at VVIX makes sense.

     

    My point is simply this. Yesterday the market thought one particular level of S&P500 put protection was enough. Today it think that another - higher - level is justified. I am trying to measure that gap in the level. What I found is that makets panic - surprise, surprise! - but the next day the panic inevitably subsides. Which is a great time to make money.
    18 Jul, 10:49 AM Reply Like
  • RJL1955
    , contributor
    Comments (383) | Send Message
     
    Macro:

     

    Like you, I had bought some puts (August monthly) yesterday.

     

    Bought more this morning (when S & P was up about 7 points).

     

    Unlike you, I am still holding (11.15)

     

    If we get a jump close to the $90 range (NYSEARCA:SVXY), I will sell. Otherwise, I may start a calendar spread on these using weekly options next week.
    18 Jul, 11:16 AM Reply Like
  • ianxponent
    , contributor
    Comments (485) | Send Message
     
    Looks like you may get your wish!
    18 Jul, 12:39 PM Reply Like
  • RJL1955
    , contributor
    Comments (383) | Send Message
     
    I sold some options that expired today (was July calendar spreads I was doing). Nice gain because of today.

     

    Decided to keep the August monthly and will sell weekly options against it.
    18 Jul, 02:45 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » That makes sense. I can't watch the markets closely as I have 6 calls today with clients so I just sold in the morning, pocketed my 26% and left it for another day. Professionals will panic again and there will be more opportunities. I love professional investors they are so dumb!
    18 Jul, 11:19 AM Reply Like
  • RJL1955
    , contributor
    Comments (383) | Send Message
     
    Macro:

     

    I understand about being tied up at work!!!

     

    I bought a little too early yesterday (not at the close), because of a client meeting. Glad that it jumped so high (went from a negative to a positive option position). I just hope that Obama doesn't affect the market in a negative way (he is speaking at 11.30_

     

    Doesn't our business owners and clients know that we need to follow the market????

     

    Fortunately, I am free today and we have the CNBC in our offices all day.
    18 Jul, 11:24 AM Reply Like
  • ianxponent
    , contributor
    Comments (485) | Send Message
     
    $0.48 to $0.71 and took my profits this morning. Now at $0.91. I really though it might take longer for the bounce back to occur with the ongoing nature of the two events.
    18 Jul, 12:38 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » Well, here's my thoughts on that. Israel has attacked Gaza so many times. We all know how this will end. It will be a 10 day thing and then there will be a cease fire for 18 months and then this will start again. Everyone knows that from past experience so that should already be built in, as Israel was going that route for the past 5 days. It was inevitable. As for Ukraine, it was clear (at least from NYT coverage) that the rebels made a blunder, thought it was a Govt plane, shot it down, and then reached out to Russia for advice on how to contain the damage. So this is not something that is going to happen again in near future and the rebels will be more careful so as not to lose all international support (if in fact there was any to start with). The market just panicked. I love panics.
    18 Jul, 12:42 PM Reply Like
  • ianxponent
    , contributor
    Comments (485) | Send Message
     
    That makes sense. I'm learning a lot re volatility. For not very much risked I've done well. I appreciate the ideas you among others have shared.
    18 Jul, 03:45 PM Reply Like
  • RJL1955
    , contributor
    Comments (383) | Send Message
     
    President Obama helped the market out alot with his comments.
    18 Jul, 12:40 PM Reply Like
  • ianxponent
    , contributor
    Comments (485) | Send Message
     
    Putin has really screwed up. His swaggering bellicosity doesn't look quite so smart now. He got the Crimea and should have quit while he was ahead.
    18 Jul, 01:26 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » Thing is, earnings are good. The professional investors are dumb, yes, but even they can't keep overlooking good earnings forever. IBM, Google, and now GE just in the past day.
    18 Jul, 12:43 PM Reply Like
  • Rock228
    , contributor
    Comments (780) | Send Message
     
    You are right but it is sad that investors keep falling for it.

     

    This game of lowering earnings before they come out and then jumping over the low bar gets old but it seems to work each quarter. Watch for the forward guidance and the revenues. They have been light so far and if that continues it will give markets pause come August when earnings trickle in slowly.
    18 Jul, 10:24 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Author’s reply » Rock, I don't look at guidance. I look at what the market PE becomes at new level of earnings. Everyone should look at that, too.
    18 Jul, 10:26 PM Reply Like
  • RJL1955
    , contributor
    Comments (383) | Send Message
     
    Rock:

     

    I agree with you about earnings and jumping over the bar. That is why a great time to be in the market is about a day before earnings and time to be out of the market is about a month before earnings (pre-announcements start occurring). Thus, I think we may have a selloff in September

     

    I disagree with you about forward guidance. For the companies that have reported so far, 67% have increased forward guidance on both earnings and revenue. Prior quarters we were lucky to get 60% on earnings and 40% on revenues. Looks like the economy is getting better (revenue) and er can grow into the market EPS (even if we have a slight selloff of 2-5%)
    19 Jul, 07:23 AM Reply Like
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