Okay, so I am going to type my thought process, and then let you guys tell me why I am wrong...
The CBOE VIX is trading near 20 year lows. The graph looks like there is limited to no downside in play. The index is supposed to measure fear in the market. The fear is so far down because so many people are buying stocks vs bonds, which is based on the Fed's interest rate policy. Also, low unemployment, the recent run up in the market, so mixed but mostly positive economic news, and the thought that wall-streeters overwhelmingly feel Hillary will win. They have her as a an 80-20 (4-1) favorite, while most national polls have it at 48-40ish (1.2-1). Now, with the first presidential debate on Monday, couldn't a lot of this change in one night?? Now, I am not a Donald Trump fan, and I don't believe he can win this debate on policy, however debates in today's day an age aren't always won based on policy. His charisma and verbal attacks will surely be something Hillary has never encountered on a debate stage, and if she gets befuddled, and Trump actually looks good. I believe this could send shock ways through the nation. Even if he is just okay, that would be better than expected, and I believe it will cause Wall Street to temper their expectations. If there is a week or so where Trump starts to rally in the polls, people will start to think about his comments he has made about Fed Chair Yellen, and what economist have said about his economic plans. Add to that the ongoing outbreaks of riots in NC and other states and the overall turmoil in the country, I would say that it is a fair assumption that the VIX could break out. I opened up a small position with this in mind today. I bought the TVIX that is 2x leveraged ETN that is supposed to match the VIX. I have set a short stop loss around 16.50. But, are there any reasons that people feel that the VIX will remain this low?
I have had some success trading between the UWTI and DWTI and had previous success with UGAZ, but those were all commodity backed ETNs and I had a good profile of what I was actually buying. To be honest, this is the first time I have ever even thought about trading the VIX for any reason. But when i saw the chart, I just didn't think it made sense not too, as it appears a lot of these spikes can be anywhere from 50-250% in a short period of time. And with a catalyst right in front of me, I thought I could gamble a little....
So, good idea or bad idea?? You guys tell me.
Submitted September 23, 2016 at 04:17PM by ProfitMonger http://ift.tt/2dgRlti
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