CBOE VIX Hits Seven Month Low

The CBOE Volatility Index (^VIX) has been on a downtrend since its high on March 17th and this morning made it down the lowest point it has seen since October 11th, more than seven months ago.  Last June I asked if the VIX still matters. By August the VIX was at a five year high and those who sold options while the volatility piece of the option price was low were short options at higher prices than where they sold, even after time value had eroded.

I’m bringing up the VIX chart again today because it seems odd to me that it’s sinking with so much uncertainty in the markets due to rising oil prices and left over sub-prime mess that.  I don’t expect the VIX to stay at the top of its range forever, but falling this low makes me weary of selling new options in too large of a quantity.  Since I’m having a hard time finding the returns I’d like to make with volatility down, I’ll continue to sit on the sidelines a little longer and wait for a better entry point. 

If I thought we were in a safe bull run I’d be apt to sell options even at these lower prices, but I have to be cautious.  Options expiration is this Friday and I’ll have a lot more (1/2 my account) to work with on new options.  I’d love to get ahead of the game this week by selling before expiration on some of the positions that are probably going to expire worthless.  I’m just hesitant to get in too early and miss out on better (higher) prices that I expect in the near future.  A slight pull back in the overall markets could be all that’s needed to get the VIX up a little and offer safer entry points for the underlying stocks.