So, potential opportunities suggested by a
high VVIX, for instance, might be fleeting if
VVIX drops back down.
What can VVIX do for a trader?
You can’t trade VVIX directly because it’s
just an index with no options, or even a
futures contract. But just as VIX can give
an indication about how to create strategies
in SPX options, VVIX can indicate how
to create strategies in VIX options. A low
VVIX indicates that VIX options may be
relatively inexpensive. If the low VVIX is
accompanied by a relatively low VIX, and
you’re bullish on VIX, a long call or a long
call vertical might be bullish strategies to
consider. With low VVIX,
the premiums of VIX op-
tions are relatively low, too,
so debit strategies might be
If VVIX is high, VIX
premiums can also be rela-
tively high. If you’re bullish
on VIX in that scenario, a short put or short
put vertical might be bullish strategies
to consider because of the higher credits
possible with the higher volatility in VIX
You might try adding VVIX to your
watch list on the thinkorswim® trading
platform by TD Ameritrade. If you put it
next to VIX and SPX, you can see how the
three of them move relative to each other in
live trading. And now that you understand
what VVIX is, it might become a valuable
part of your trade-identification toolbox.
Thomas Preston is not a representative of
TD Ameritrade, Inc. The material, views, and
opinions expressed in this article are solely those
of the author and may not be reflective of those
held by TD Ameritrade, Inc.
For more on the risks of trading and trading
options, see page 37, #1– 2.
THINK TANK • EASY
What’s Hot and
BIG IDEA: AT ANY GIVEN TIME, DO YOU KNOW
WHICH STOCKS ARE MOVING, WHERE VOL
IS, OR WHEN AN IDEAL SETUP IS FORMING?
THESE TOOLS MAY HELP.
TO FAANG OR NOT TO FAANG: THE HEAT MAP
What’s driving an index, and what could potentially drive your next
trade? Stocks, of course! But because the stocks of some companies
make up much more of a given index than others, they can take the
driver’s seat and massively influence their corresponding index’s
value. The thinkorswim® Heat Map shows you just how big these
stocks are relative to the index’s value, which could give you some
ideas for the next generation of a “FAANG” gang.
1 – From the Market Watch tab, select Visualize
2 – From the dropdown, select Heat Map
3 – Select the arrow to the left of the three categories listed
(“indices, public, personal”)
4 – Note all your choices (see Figure 1)
FIGURE 1: Heat map. The bigger the company, the bigger the square. Green means the stock price is up, and
red means it’s down. The more intense the color, the larger the price move. Source: thinkorswim® from TD Ameritrade.