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Volatility is in the Gutter. Again.

Now that January is behind us, we can sample the 1-month volatility in the market without having data skewed by the massive gap higher.

So where are we at right now?

spx-vol

The 20-day (1-month) HV clocked in at a whopping 5.46 today.

If you have been staring at the equities market for the past month and felt bored, there's a reason for that. When the trend is taken out of the equation, we're at statistically significant levels of volatility.

How significant?

Here's a 20-year distribution of volatility in the S&P

We're on the very, very low end of volatility.

And if this feels like Deja Vu, well... it is.

I wrote the exact same post at this time last year.

Making Volatility Bets

If you think that there is an easy long volatility bet right here, think again.

The current VIX readings are nearing 15%, which means you can't go and find "cheap" insurance in this market.

There may be a good play in buying straddles in the QQQ, or maybe time spread sales in the SPX but if you want to get long vol, consider trading individual equities as a good bet.

Find the Action

So where has the volatility gone? The Yen.

usdjpy

The action from the new Japanese government and the BoJ has created not only a change in trend, but an acceleration of volatility. If you're bored trading the ES futures you may want to look for opportunities in the 6J currency futures.

The Yen is important here because this is a major source of liquidity for risk assets (equities). I've already stated my case that until this move in the Yen ceases and the large-cap financials roll over, equities will have a persistent bid.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/