It has been a terribly boring few months for premium sellers like me. Limited opportunity led to very little usage of available capital (net liquidity). There have been a few trades here and there, but most felt forced and most resulted in a small capital loss.
On Tuesday I put on the first trade that I have felt good about in a while. It was a credit spread in IWM. Kept size small since the implied volatility in IWM is below my typical criteria metric, but the trade looks good so I put it on.
I am getting the feeling that I’ll be back in the game in a big way very soon. With Tuesday’s down move, yesterday’s slight recovery, and today’s huge bear gap open I think we’re onto something. Couple that with VVIX showing strength on down VIX days a few times recently (possibly indicating Trader’s are expecting the VIX to pop soon) and major relative strength in RVX which the other volatility indexes may catch up to, and there may be some bumpy roads ahead.
For the sake of my engagement and earnings potential in 2014, I sure hope all the signs I’m seeing and my gut feeling are correct.
Here’s to volatility! I sure would love to see you come back, you’ve been on vacation long enough!