As you might expect, the rally of the past two days has pushed the VIX down quite a bit. As the VIX daily chart shows, the index is today pushing against the lower edge of its Bollinger band, and just a hair off its 200 DMA.

The Thesis

The thesis here is just that the VIX is mean-reverting, and that since June of last year it hasn’t flirted with its 200 DMA for long without bouncing right back up. If this is the start of a big and sustained multi-month bullish run, that tendency might not hold true, but given the economic climate we don’t see any reason to expect that to happen.

The Trade

1) You could buy some VIX March 25 calls for $1.05, or
2) take the long-theta route by selling the VIX March 22.5/20 put spread for $0.80.

Disclaimer: We disclaim!

If you’re wondering what the Woody Guthrie pic has to do with anything, well, it doesn’t. But we like to think that Woody, rebel that we was, would be strategically long volatility.