As we head into the second half of 2017, investors are being reminded that stocks don’t just go up forever.
So far in 2017 we have seen short volatility trades perform incredibly well. It has been one of the best periods for these type of strategies that I can remember in my 13 years of trading options.
Volatility products such as XIV and SVXY have gained massive popularity with the general public and it’s not hard to see why. XIV is up 93% this year and SVXY is up 92%.
However, it’s important to remember that these products can suffer precipitous declines when volatility spikes, such as in August 2015 when SVXY lost 53% in 3 weeks.
When the waitress at Ruby Tuesday starts talking about selling naked puts as a way to supplement her income, you know the short vol trade is getting a little crowded.
You can see in the chart below that just about everyone is now on one side of the short volatility trade and when the bubble bursts, it could get really messy. You definitely don’t want to be the last one left at this party.
So can the short vol trade continue to work in the back half of 2017? Yes, provided that realized volatility is not much higher than the implied volatility.
Join me for a free webinar series starting July 25th and I’ll explain what all this means, plus I’ll be reviewing some of my trades from the first half of 2017 and sharing my plans for the reminder of the year.
There will be lots to cover and plenty of opportunity to ask questions.
You can register for the webinar series below. These will be recorded, but you will need to register in order to get the replay.
https://register.gotowebinar.com/register/191218650061909762
Spaces are limited so get in early.
To your success,
Gav.
July 25th 8pm New York time – The Secret to Consistent Income With Options
August 1st 8pm New York time – 2017 Trade Review and What to Trade Next
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
Thanks for the first free webinar Gav. Good to find another Australian options trader, although I note you use US examples. Do you trade on the Aus market as well? I am also self-taught and tend to use credit spreads (mostly in Aus as I need the sleep!). Could you please send your free books as I could only get onto the No BS Butterfly Spreads from Amazon, the others had expired.
Thanks, Dave
Hi Dave, Just emailed you the books. I don’t trade the aussie markets, there isn’t enough liquidity and the commissions are too high. Not the best for the sleep patterns I agree, but I trade a pretty low risk style, so I don’t need to be that active.
Gavin,
Just read your no BS IC book. Great read. Can you send me your other books?
Hey Scott, just sent them to you.