The market, as measured by $SPX, continues to fall at a rapid rate. It has broken down below the lower end of the trading range that had existed since last November. It also broke through a support line at 5670 (higher horizontal red line on the $SPX chart in Figure 1). The next support area is likely to be near 5400, which was last September's lows.
Over the years, I’ve written extensively about the $VIX/SPY hedged strategy, a position that allows traders to take advantage of the inverse relationship between volatility and the stock market. The strategy is designed to profit from large market moves in either direction, but its real power emerges when an “edge” appears—such as when $VIX futures trade at a sizable premium or discount to the $VIX index.
The 20-day Historical Volatility of the $VIX futures (middle row of the table below) is now exceedingly low. This will not last, and one can expect some sharp movements in the ensuing weeks, but the timing of such a move is not clear. There have been articles on Bloomberg and elsewhere in the past week, discussing how speculators (which they classify as “smart money” – although I’m not sure how they’d know that, except possibly for the size of the trades) have been loading up on on the $VIX March (18th) 23 and 24 strikes calls. The articles claim that market makers would be extremely short volatility at that level and could accelerate a volatility push to the upside should the March futures trade that high.
I recently sat down with Jeff Gibby on MetaStock’s Ticker Talk to discuss my journey in trading, market volatility, and options strategies. From my start in finance after serving in the Army to founding McMillan Analysis Corporation, I shared how my passion for options developed and how traders can navigate today’s unpredictable markets.
Buying straddles in advance of earnings is finally be coming back to life. For some reason, after the pandemic, it was not viable until this earnings quarter. In the last few weeks, however, there were profitable earnings moves in several names – including all four of our recommendations last week ($ROKU $FIS $TTD $ABNB).
In his recent webinar, Lawrence G. McMillan, President of McMillan Analysis Corp. and author of Options As A Strategic Investment, shared crucial insights on navigating the volatile market environment of 2025. McMillan discussed key market indicators signaling potential buy and sell opportunities, examined whether the recent surges in volatility are likely to continue, and provided an in-depth look at how the first year of the presidential cycle could impact stocks. He also explored seasonal barometer indicators for January and the potential of new covered writing ETFs. Watch the full webinar recording below or click here to gain expert insights on how to harness market volatility to your advantage.
There are some longer term seasonal patterns that affect the stock market. One is that years ending in ‘5’ have generally been quite bullish since the first one in 1895 (to go back that far, one must observe the Dow, for $SPX did not exist). In fact, such years were mostly wildly bullish until 2005, when $SPX registered only a small gain (and the Dow registered a small loss). Even worse, in 2015, both registered small losses. However, overall, years ending in ‘5’ have a strong track record.
