Now That Fear Has Subsided, How To Play Volatility Using VIX Options And ETPs

Scott Murray profile picture
Scott Murray

So much for that September sell-off that was inevitable. It never ceases to amaze me how consistently wrong the financial punditry is, and no one ever gets called out on their emphatic prognostications. (Is the ECRI out of business yet?)

I questioned the lofty volatility expectations in my last article: Fall Volatility Ahead? The Futures, Options, and ETPs Already Expensive. We did not try to predict the future market movement, we just tried to examine if volatility products were priced for something exorbitantly negative. If you bought volatility ETP put contracts after taking a hard look at the high price of the VIX futures, well, congrats to you. Long hedgies are reeling, and odds are they are underperforming the S&P 500. Let the chase begin. (That is 90% of you guys...)

See, Wall Streeters love headlines, and they even design algo bot trading programs to trade the headline in seconds. Combine this with subscription data lines to high frequency traders literally next door to the exchange, and you are decades late if you are one minute later than the Bernanke press release.

But in the case of September headlines for example, of course no one actually researches the data, or adjusts for outliers like hurricanes, wars, terrorist attacks, or dot com bubbles bursting; all of which for some reason happened in past Septembers. Furthermore, 45% of Septembers in the S&P 500 are up months. Not far from a coin flip, no? Did you hear that anywhere on CNBC? How much money would you bet on a 45/55 gamble? We are not talking about asymmetric return potential to be sure. And in the case of derivative prices in September, the odds were much worse than 50/50 due to the highly anticipated, but not duplicated sell-off and inflated futures and option prices. This is if had you chosen to go

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Scott Murray profile picture
Co-Founder of, a proprietary volatility strategies firm. Using creative historical volatility analysis, we are able to provide actionable strategies for hedging, trading volatility, and finding value in today's turbulent markets. Our proprietary strategies utilize derivatives based exchange-traded products, VIX related derivatives, and options analysis. We have analytics for both retail and institutional investors. Follow me on Twitter and Stocktwits @VolatilityWiz and contact me at

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