1/x Big fan of @sentimentrader ‘s work & there’s still some signal here, but important to note that there are a couple critical issues this analysis: ignores:1)The VIX is priced on calendar days, but dealers tend to price underlying options on trading days. So,w/4 days in an avg
https://twitter.com/sentimentrader/status/1398356722981302272
2/x long weekend (1 day taken out for post holiday slowness) all else equal, that represents ~1 IVol pt rise in VIX 2) by focusing on %change in VIX (which many belabor as flawed) off of a 52 week low, the results are skewed, as they all start w/ a low denominator (near 10 VIX)
3/x 3) VIX is a mean reverting fxn & the longer the time away from a 52 week low, the more likely the reversion to the mean. That said, taking advantage of this in reality is quite difficult as VIX isn’t a tradeable product. VIX futures of SPX Options are, & all of these products
4/4 have significant costs to carry this exposure for a month+. For Vix futures the cost is contango & for SPX Options theta+ contango...As such, be careful taking something like this @ face value. There’s likely some signal here, but likely way less than might initially appear!
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