With that we saw volatility, as measured by the CBOE Volatility Index rise to it’s highest level in over 4 years, testing 50 from a reading of 12 just 3 days prior.
MSCI All-Country World Equity Index vs CBOE VIX
Buy The CBOE VIX
Technically, we saw a break of the long term downward trend and with a re-test of the breakout level currently taking place, giving traders a second opportunity to take a long position.
Here, my idea would be to buy an Out-The-Money Call Option on the CBOE Volatility Index, taking a 6 to 8 week view with the expectation that we may see another move lower on global indices and another spike in volatility.
Buy OTM Call Option on CBOE VIX
Expiry Date: 18 April 2018
Underlying level: 20.60 (last close)
Most markets haven’t done much over the last few trading sessions.
Here is the GBPUSD, one-hour chart showing recent moves:
The week’s range is largely confined to the 200 pip box drawn in, while it could be argued that we’ve seen less than 130 pips of movement over the last two days.
There has been a dramatic reduction in risk pre Brexit vote, as measured by the US VIX:
and the US and European markets have behaved themselves for the last few weeks:
So where is all the volatility we’ve been talking about?
Its on its way.
Polls open early tomorrow and close at 10pm UK time tomorrow night, while the future of Britain’s relationship with the EU will only be known 9 hours later.
Here is time-line of what to expect (all times are GMT +1. To convert to SAST, add an hour)
7am – 10pm, June 23: Polling stations are open
Note: Major broadcasters have not commissioned any exit polls during the day, over concerns about accuracy.
4am – 7am, June 24: Expect results to come pouring in. This will likely be a very volatile period in the markets.
So, by 8am SA time on Friday morning, we’ll know the confirmed Brexit/Bremain result. Tomorrow, I promise, I won’t even mention the word Brexit – we’ll look at something completely different.
And right now? Well, I am brushing up on my skills as a trader during this period. I would like you to join me if you are interested.
Glenn Howell | PracticalPips
PS. Before you join my mentorship program, you will need to open up an offshore trading account