I hope everyone had a fun week last week. As I noted recently, we were in a somewhat extended period since the last "Official" CBOE Volatility Index (VIX) Pop. But, since it was a pre-holiday week amidst the worst time of the year for volatility, I took a few days off. Hey, what are the chances the Vol Pop happens right before July 4th?

Apparently, about 100%. We've had Greek news and deadlines and threats and counter-threats and threats to the counter-threats for five years now. But this turned into The Big One.

There's no certainties to any of the "predictions" we all make. At least, there shouldn't be. In the real world, we deal more in probabilities. You will make money if you find situations where there's a disparity between the expected probability of an event and the probability the market assigns to that event. For the lion's share of the last six years, the market has consistently overpriced the odds of an imminent volatility pop. By and large, it pays to fade that overpricing. 

But that doesn't mean those Vol Pops don't happen. They always do, and clearly when I least expect them. I did expect one sometime in the next couple of months; I didn't expect one last week. 

Anyway, at least it gives us a good excuse to open up the VIX Pop Table! Just to refresh, I use "20% above the 10-day simple moving average (SMA)" on a closing basis as the official definition of an Overbought VIX. And below is a rundown of Overbought VIXes since 2009.

I include the one-month and three-month returns of a long initiated at the close of the first session VIX closed 20% above its SMA, as well as returns of a long that's closed after the first session where VIX closed below its 10-day SMA. Also, I note the duration of that trade (in trading days) as well as the duration from the first Overbought VIX until the nearest SPDR S&P 500 ETF Trust (SPY) bottom. If it's zero, the first day of the Overbought VIX was the bottom. I also include the mean and median one-month and three-month returns of trades initiated on any random day since 2009.

 

 

As you can see, fading Overbought VIX has been a generally good idea over the last six years -- at least in the near term. Buying and holding until VIX closes back below the 10-day has had a median return of 0.84% with an average holding period of slightly over a week. Further, the trade "won" 12 of the last 15 times. 

Going a little further out, holding for a month has had a median return of 4.08% vs. 1.61% on randomly timed one-month holds. It's also on a nine-"game" win streak, albeit with the tiniest of wins last July. 

By three months, the Overbought VIX has no real impact on returns. I can take a rose-colored lens to that, though, and point out that anyone who tells you the VIX pop "predicts" future doom and gloom in the longer term needs to show some real data to back those assertions up. 

Oh, and a reminder: I don't want to double-count data, so the blanks on the table are to avoid overlaps. 

It's important to note that all of this looks back on an era that we know in hindsight was a bull market coupled with a low VIX "regime." We don't know that's the case going forward, of course. One of these VIX pops will "stick." Maybe it's this current one, though as always, it's way tougher to call a change in trend than it is to simply stay on the same path. 

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

When the going gets tough, the tough get going… into European options! This, from Bloomberg:

"Whatever happens after Greece's vote, stock investors have had time to prepare. 

They've taken action in the options market to hedge against equity selloffs, trading an average of 1.6 million Euro Stoxx 50 Index contracts each day in the past month -- the most since 2011.

… Gauges of equity volatility have surged in European markets, where a first-quarter rally that added almost $2 trillion to share prices has roughly cut in half on concern Greece will exit the euro. The VStoxx Index jumped 21 percent last week and touched its highest level since 2012 as equities posted their biggest decline in 3 1/2 years on June 29." 

Viewed through the 2015 lens, Euro Stoxx 50 Volatility (VSTOXX) has indeed exploded lately.

Longer term, though? Eh. We ain't seen nothing yet.

It looks almost exactly like a long-term chart of the CBOE Volatility Index (VIX), albeit with the timing of the peaks and valleys a bit different. VSTOXX around 30 looks kind of like VIX around 25. That is to say, a bit elevated but nowhere near potential tops. 

I doubt VSTOXX sees 2008-09 sort of levels, because I really, really, really doubt Greece is the sovereign version of Lehman. But when you see this chart, it sure seems like VSTOXX at 40 is more than possible. Realized volatility is surging, and the story still hasn't resolved itself yet. 

On the other hand, we're going on five years of "Grexits" and "Greferendums" and all sorts of GR words. It's pretty likely someone somewhere has prepared for this day. In fact, it's very likely. Relatively short-term volatility pops happen 3-5 times every year and are tough to time. I don't tend to believe lasting volatility storms come from stories that have dragged out forever.  

It wasn't that long ago that the Financial Media Industrial Complex overused and misused the term "Black Swan" to explain every "surprise" in the marketplace. The whole concept of the Black Swan is that it's an unexpected and unanticipated event. No one's actually calling the recent Greece developments a "Black Swan," per se, but they're treating it as such.

I can't speak to the real effects of Greek default and Greece leaving the euro. I can speak to market psychology, though, and my guess is we're fairly close to the point where this story is fully discounted in our markets. 

Will we rally soon? Well, who knows? This isn't the only story out there. China's market is insanely volatile lately, and a crash there is probably not discounted over here. All I'm saying is I think we're finally near the point where we can mercifully Grignore Greece. 

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

I do think there's a growing sense that this Greek story is about to wrap up -- at least to the extent we obsess over it. I've said it before … and sure enough it rears its Grexit-y head back up again. But this time I feel confident. 

Why? Because China Fear has gotten more and more airplay. We need something that means Doom and Gloom for stocks, and this one fits the bill. The Shanghai Composite has lost one-third of its value (or something like that) in a few weeks. That has to spill over here, right?

Well, its still up big on the year -- and we're flat to down now, depending on where you look. So guessing it's not the Shanghai Crash that's spooking us. Rather, it's the Shanghai volatility. And that I can understand. I mean, we all know that volatility spills across asset classes … sometimes. 

With that in mind, I was thinking it's time to look at our CBOE Volatility Index (VIX) vs. the implied volatility of some other asset classes this year. We noted Europe vol yesterday, which as you would guess, has spiked a bit vs. VIX this year. 

How about China? Here's CBOE China ETF Volatility Index (VXFXI), which proxies volatility on iShares China Large-Cap ETF (FXI). Now, FXI doesn't swing quite like actual Chinese stocks, but it's somewhat of a proxy.

And yes, you can make a case that the vol jump here "predicted" the recent VIX jump. The two moved in lockstep until a few months ago, at which point FXI vol exploded and VIX kept its head in the sand.

On the other hand, what good is a three-month lag? I could literally always point to a vol spike somewhere and say that's going to cause a vol spike here, and if you give me three months, it will prove correct almost every time. So scratch that. I'm going to say that, like pretty much everything, it doesn't matter until it does. We weren't too jittery in March and April and thus could ignore spiking China vol … but now, it's VolSpikeMageddon! 

Anyway, how about VIX vs. vol in the euro -- measured by the CBOE EuroCurrency Volatility Index (EVZ)?

This pup spiked even earlier. And again, it predicted our recent spike so long as you gave it about four months.

It is interesting, actually, that euro implied vol hasn't really moved since January. It's not the sense I had watching the recent gyrations and/or euro implosions.

And finally, how about some oil? Here's VIX vs. the CBOE Crude Oil ETF Volatility Index (OVX).

It's actually trailing the VIX! That makes some sense, seeing as we don't talk much about oil these days -- at least on a relative basis. We have to go all the way back to last fall, when imploding oil and spiking oil vol were predicting our doom. It also highlights the Convenience of Choosing Your Endpoints. If I graphed back to this time last year, you'd see a gigantic spike in oil vol vs. VIX, much like you see in VXFXI and EZV. OVX dragged VIX up a bit, but ultimately oil vol went back to "normal" and VIX has hovered in the teens all year.

It's very tough to prove or disprove volatility contagions. My basic theory is that markets have a mind of their own and we tend to backdate "causality" relationships as a way of explaining things that often defy easy explanation. There's almost always a vol pop somewhere, but our stock market doesn't always care about it. We do care now, so until this passes, we have to pay attention to Greece and China and whatever else comes our way next.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

If there was any doubt we're in a Fear wave, well, I bring you this screenshot I took from MarketWatch mid-morning yesterday, before the Big Board halt:

For a more level-headed take on China, I bring you Michael Santoli from Yahoo! Finance: 

"It's interesting that the bear assault on China shares has merely dropped the benchmark CSI 300 index -- roughly tracked by the ETF under symbol ASHR -- to levels it first reached on March 16. It so happens that the American S&P 500 (GSPC) traded that day at 2081 -- exactly where it closed on Tuesday. 

Yet in the interim, the Chinese market surged 46% into its June high before collapsing by 32% since. The S&P, over that same time barely budged -- rising a mere 2.3% to its high and then slipping around 3%. In the eight months before the CSI 300 and S&P 500 got to those March levels, the China index had soared 68%, and the U.S. index just 6%. 

So if the U.S. market never caught the benefit of the explosive surge in Chinese equity-market values, why would the violent unwinding of this overheated rally matter terribly much for American investors -- who generally aren't significantly invested in the mainland market?" 

He points out that no one is saying that this or Greece don't matter. Rather, it's more one of degrees. We treat each successive story like it's The Biggest News Ever, and will be that way until the end of days. And inevitably, it fades and we freak out about something else. Or not. Mostly not.

The real key is rarely the actual news or expectation of news, rather it's the market backdrop. And right now we're in the midst of a major Fear Blast. In fact, the CNN Fear and Greed Index indicates we're still in "Extreme Fear" mode, and have been for at least a week.

Unlike MarketWatch, I have no clue how China will play out. I would note, though, that counter-trend intervention never works. If Chinese authorities want to prop everything up, they should stop bidding now and then wait for the swoosh and start buying on the way up; they'll beget a panic buy wave. Buying into a panic just causes an increase in the panic, and shutting trading off in shares completely just makes it worse.

The rational case for this mattering enormously here doesn't really add up. I'm not saying it's something to ignore -- I mean, the volatility alone is jaw-dropping. But economically? Did a couple months of low-cap foreign shares in a clear bubble cause such a wealth effect that analysts started raising estimates on our internationals? Were shares flying on predictions of a faster-growing Chinese economy and are those predictions now off the table thanks to the stock crumble? I really doubt it. As Santoli noted, we didn't exactly follow them wildly higher; the Chinese stock explosion coincided with a low-volatility grind higher here. 

So I'll guess that we get a washout in China shares then an explosive rally, and we'll obsess over every tick there for a couple weeks… and perhaps wash out our own mini-wave of ugliness. 

And then we can start fretting in anticipation of the Scariest of All News Events: The Possibility That the Fed Hikes Rates in September. I predict that MarketWatch has only this on its front page that day:

 

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

So we have plenty of signs of panic, not the least of which is the recent spike in large-range days and "key" reversals. But hey, there's one spot that doesn't look terribly worried -- and that spot is, oddly enough, CBOE Volatility Index (VIX) futures.

The term structure, in fact, looks relatively flat:

The futures actually "predict" a very modest downtick in VIX in the nearer months. But that's kind of a misleading way to look at it. VIX futures ALWAYS expect to see VIX in the high teens. Now that VIX sits in range, it's more like the futures were "right" and the pesky VIX has just sat incorrectly low for all these weeks/months/years. 

Or maybe not. The point isn't really that VIX futures predict anything, because if they do, they get it right about as often as a broken clock gets the time right. Rather, it's a hedging/bear speculation vehicle and like all tools that protect against/bet on some downside, it overprices the likelihood of a downside move. So the question is more of degrees. 

So, how do we compare now to other term structures of 2015? And that's where we don't see a spike in Fear. 

Here's a few VIX term-structure snapshots from this week vs. a couple other times in 2015 when we saw VIX in this high-teen range:

The slopes all look very similar, but we're at considerably lower levels all across the curve than we were on Feb. 10. And I guess I have blinders on, because I can't remember what got us so fraught with VIX love back then, while it feels like the current worries now represent the biggest Fear Wave since last fall.

Now, mind you, this is just futures in a relative yawn. VIX calls are exploding both in absolute volume and relative volume. But hey, it's a sign of not taking this VIX pop particularly seriously, so there's that.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

Given all that's happened in global markets ​recently, it's not a surprise the CBOE Volatility Index (VIX) has scorched higher. As of yesterday's close of 19.97, the "fear gauge" had added roughly 65% since only June 23, and sported a year-over-year (YoY) return north of 70%. According to Schaeffer's Quantitative Analyst Chris Prybal, this development has been a promising signal for the S&P 500 Index (SPX) during the past few years.

As you can see, the SPX clearly outperforms its "at-any-time" returns after the VIX reaches the 70% YoY level. The SPX has produced positive five-day returns after this level is hit 86% of the time since 2010, with an average gain of 3.4%. The rest of the time, the SPX has enjoyed a five-day return only 59% of the time, with an average gain of just 0.2%. That's quite the discrepancy.

What's more, each time the VIX has hit 70% YoY since 2010, the SPX has posted positive 63-day and 252-day returns, of 7.1% and 18.3%, respectively. For comparison, the broad-market barometer's at-any-time returns over 63 and 252 days stand at 3.2% and 14%, respectively.

Meanwhile, there tends to be a huge drop in volatility following a 70% YoY VIX gain. In fact, after these instances, the VIX has never been positive on a 63- or 252-day basis, and has given up an average of 31.6% and 54.3%, respectively, during these times. You can see the full results below. Pretty staggering. Also worth noting: the VIX is off 10.8% today at 17.82, as U.S. stocks follow China and Europe into the black.

As soon as the VIX-mentum washed upon our shores, it vanished. Yes, we can officially close the books on our latest overbought CBOE Volatility Index (VIX). All that's left to do is add up those returns in "X" months. We are back to DEFCON 1. That is, VIX closed Friday beneath its 10-day simple moving average, which means -- alas -- we have an update!

It took us eight trading days and an awful lot of Greek and China news, but we're now in summer relaxation mode! If you bought on the VIX alarm, you earned 0.98%, which is (sort of) coincidentally the median return if you followed this strategy every time the "Overbought VIX" buzzer went off. The average duration of the play is 5.52 days, so I took the liberty of calculating the mean and median returns of randomly buying and holding for six trading days since July 2009. And your average win was 0.36%, slightly higher than the average win during "VIX On" of 0.31%.

The difference is not statistically significant. If you prefer medians -- and you probably should in this case -- you do outperform, 0.98% to 0.52%. The trade has "won" two-thirds of the time.

Another semi-interesting footnote is that the SPDR S&P 500 ETF (SPY) bottomed (so far) six days after VIX hit overbought. That's close to being in line with the average time frame of 4.57 trading days. This stat is somewhat subjective, as it's only a "local" bottom. If SPY takes out the lows in the next week or so, I'll adjust that date. I won't adjust if it takes place later, or VIX gets overbought again this week. In that case, I'll consider it a new occurrence.

And that brings up an interesting point. VIX hit overbought on July 17 last year after a nearly six-month quiet stretch ... and then it got overbought again two weeks later. This latest VIX alarm went off at an almost identical time frame. So, will we see a rerun -- i.e., another VIX blast this week? Anything is possible. I mean, we're still quite jittery and, all things considered, it wasn't exactly an upside explosion on Friday, given the good news.

On the other hand, this summer's VIX blast carried on longer than last year's -- eight days vs. one. My guess would be that if we get a second wave down, it won't happen quite as closely in time as it did last year. Then again, I didn't think we'd see this kind of volatility around a long holiday weekend in a seasonally terrible time of year for vol. ... so what do I know?

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research

It's now officially official: the bear market has ended! Greece has taken a page from the George Costanza School of Negotiation and apparently agreed to a deal worse than what was made available a few weeks ago. 

Or at least that's what they tell me on TV. I really only follow this story because it's The Only Story That Matters for the moment.

They also tell me it's not actually done yet, just an agreement to agree to negotiate again in a few weeks. And that's great, because I'm not sure how financial TVers would fill their day without asking everybody to become an expert on Greece. 

But whatever. The Volatility Complex buys that this story will mercifully fade away. The CBOE Volatility Index (VIX) is now back to levels last seen before the June 29 Euro Blast. 

As we noted last week, the VIX futures didnt pop to the extent they did in other times of elevated VIX in 2015. So it probably pays to check it out again now that we're in at least a momentary decline phase. Well, here's ye olde term structure as of yesterday morning:

And we're back to normal! The slope has steepened, up over 3 points front-month to back-month, from 1 point just last week. And of course VIX is going to the high teens in half a year because … VIX is always going to the high teens in half a year, no matter where it sits now.

Oh, and about those comps. I picked a couple of other dates from 2015 where VIX sat in the mid-14s at least part of the day AND was in a bit of a decline phase, and compared it to yesterday.

And lo and behold, the term structure has dipped. In fact, it's dipped by a fair amount; it's between 1 and 2 points lower, depending on how far out we look. 

It's similar to what we saw in Elevated VIX. The marketplace simply doesn't price in the same future VIX pop as it did earlier in the year.

Complacency? I suppose it's complacency on a relative basis. But let's put it into some context. VIX futures still overprice the probability of a VIX pop at all time frames. It just overprices that probability less now than at other times. 

And VIX calls remain as popular as ever. In fact, even more so.

$VIX call volume today is heading for a a record. 1.9 million calls traded, the most ever (previous record was 1.85 mil on Feb. 3, 2014).

— Callie Bost (@callieabost) July 13, 2015

I've often wondered why poor results from buying VIX futures at big premiums and cheap VIX calls that never pan out hasn't ever seemed to change market behavior. So perhaps after six years of VIX Groundhog Days, the market is adjusting a smidge? Maybe.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

As we have noted, the CBOE Volatility Index (VIX) has hit some notable milestones recently. Last Thursday, the market's "fear gauge" jumped to its highest point -- 20.05 -- since Feb. 2, bringing its year-over-year level above 70%. 

And then there's yesterday's VIX option activity. As you can see below, Monday saw the second most VIX options traded since its inception. This chart comes courtesy of Schaeffer's Quantitative Analyst Chris Prybal.

The VIX volume record was set back on Feb. 3, 2014, when roughly 2.4 million contracts crossed. On that day, VIX closed at 21.44. For comparison, VIX closed Monday at just 13.90, shedding 17.4% on the day -- and breaking below a key level noted by Schaeffer's Senior VP of Research Todd Salamone in this week's Monday Morning Outlook -- with over 2.1 million option contracts traded.

Looking at yesterday's details, call volume ran at nearly four times the expected intraday pace. It appears much of the volume was courtesy of one trader, who rolled out her bullish bet. Specifically, it appears the speculator rolled a mega ratio spread at the August 17 and 23 calls into a spread at the September 16 and 22 calls. 

Another day, another decline in volatility. "VIX & Fear Totally Collapse," says SlopeofHope.com. And if you look at his chart, it does give the impression of volatility literally jumping off a cliff. Of course, if you construct any chart to be twice as high as it is wide, and start counting at a number higher than zero, you run the risk of producing misleading imagery.

Suppose you took 20 people and charted their height, and say they ranged between 5' and 6'6". If you started the chart at about 4'10", the taller folk would look about 10 times taller than the shorter ones. Here's how the CBOE Volatility Index (VIX) over the last five weeks looks when the width of the chart is about three times the height.

That cliff looks a lot flatter ... but whatever. Numbers are numbers and VIX has seen an abrupt drop this week. It's down 30% or so in about four trading days. That's large, but it's not unprecedented.

It's certainly a sign of "complacency," or at least a sign of a speedy reduction in fear. I'll agree with the gist of the Slope of Hope header. The real question, though, is does it mean anything for the market?

So, with that in mind, I looked at the SPDR S&P 500 ETF Trust (SPY) since July 2009. Here's every instance where VIX declined 25% close-to-close over a one-week (five trading days) stretch, and the one-week, one-month, and three-month returns, if you bought on the first close where VIX had dropped greater than 25%. On the bottom, I include random one-week, one-month, and three-month returns.

We haven't quite hit the threshold yet this go-around, as it's not quite a week off the highs yet. And hey, maybe VIX explodes today or tomorrow and we don't hit it! Anyway, as you can see, there's absolutely no signal here in any time frame. The market has mostly gone higher after the VIX implosions, but it's mostly gone higher in the last six years over any random time frame.

And it kind of makes sense. For one thing, I've yet to conjure up a study that finds a tradable signal in complacency. It's just a lousy market driver. Fear is a strong emotion and tends to resolve itself in some fashion. It's generally bullish, but at times it's incredibly bearish. Crashes happen off fear spikes, they just don't happen all that often.

Apathy is a weak emotion. By definition, it calls us to inaction. It doesn't resolve quickly ... it doesn't really resolve at all, it's just there. Calling what we see right now apathy or complacency only serves to mislead, though. A better description is that we had a fear spike that played out over about two weeks, and now we've simply returned to our regularly scheduled programming. And this is a show that's been running for over six years now. And there's no indication that an abrupt return to the norms leads to anything unusual in the markets.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research

Even though the CBOE Volatility Index (VIX) remained in the teens throughout the recent Sino-Grecian Scare Fest, the interday and intraday moves were on the violent side. And I know we always say "this time was different," but indeed, this time was a little different. This, from Bloomberg.

"Since April, the VIX has jumped an average of 17 percent on days when the S&P 500 fell 1 percent or more, compared with 12 percent on average for similar daily moves since the start of the bull market, according to Bloomberg data.

" ... measures of correlation between the S&P 500 and VIX also point to "near-panic conditions" in the market, Sundial Capital Research Inc.'s Jason Goepfert wrote in a July 1 note. The two gauges are trading the most inverse to each other since December 2011, Bloomberg data show."

That correlation stat intrigued me a bit. I checked and, of course, Jason and Bloomberg are correct. I calculated a rolling 20-day correlation between the day-over-day VIX moves vs. the day-over-day SPDR S&P 500 ETF Trust (SPY) moves going back to July 2009, and here's how it looks:

We're at negative 0.97 right now, which needless to say is about as low (really high) as it gets. In other words, we're in nearly perfect inverse correlation. Over the entire sample, VIX and SPY have a negative 0.80 correlation, so we're indeed detached from the norm.

Incidentally, those blips "up" toward zero are almost all near the end of calendar years, meaning it's most frequently just a time when the market's not moving much and VIX is correlating more to the pain of paying time decay than to actual volatility in the marketplace. But I digress.

The most important question is whether periods of increased correlation are at all predictive of future market action. And best I can tell, the answer is no.

At the risk of going all "second derivative," I compared the backward-looking, rolling 20-day VIX-SPY correlations with 20-day forward-looking SPY returns. And there was virtually no relationship -- they have a correlation of 0.013. And here's a scatter plot of the data:

That's truly a chart about nothing. So, it is kind of interesting to see the recent spike in emotions. Unfortunately, it doesn't yield us a whole lot in terms of clues going forward.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

It's Friday, it's a bull market again, and … as far as I know, there's no Most Important Greek Deadline Ever this weekend. I could be totally wrong on that last one, but we're probably ignoring Greece for now anyway. So, Back to the Randoms! 

I used to write up the iPath S&P 500 VIX Short-Term Futures ETN (VXX) a bit more than I do; in fact, I can't remember the last time I wrote it up. I'm pretty sure most are well-versed in the futility of owning VXX for any length of time. It goes down because of the near-permanent contango in CBOE Volatility Index (VIX) futures, but it's not the actual rolling of VIX futures to maintain duration that costs VXX money. Rather, it's the implied cost of owning a declining asset (i.e. a VIX future at a premium) for even a microscopic amount of time. 

Long story short, if I bought a VIX future when I started writing this sentence, it was worth less when I finished this sentence. VXX proxies that dynamic.

Anyway, Statistical Ideas set out to look at some numbers on holding VXX, and as one would expect, it's not pretty:

"In the past ~3.5 years (890 days), there have been 163 250-day lows (~weekly), but only 0 250-day highs.  One year of course is ~250 trading days, and so there has ​​never been such a duration when one could have profitably bought and held this product​ (not even if we stretched back the VXX data for a 2 remaining two additional years.)​  Even if we instead convert to semi-annual periods, there still has been zero 125-day highs (so 0% of the 890 days).  This avows how rapidly the product collapses, that no eventual spike has ever became a 6-month high." 

Last time I updated my VXX data, it had made a new all-time low on about 21% of all trading days, basically once per week. So it's none too surprising that you literally never win by holding for any length of time. 

But what if there's another "Lehman"? Perhaps one that's much worse? This, from Bloomberg:

"Hedge fund manager Paul Singer said that China's debt-fueled stock market crash may have larger implications than the U.S. subprime mortgage crisis, echoing warnings from fellow billionaire money managers Bill Ackman and Jeffrey Gundlach. 

'This is way bigger than subprime,' Singer, founder of hedge fund Elliott Management, said at the CNBC Institutional Investor Delivering Alpha Conference in New York in response to a question about China's crash potentially affecting other markets." 

Forget what I said earlier. Buy VXX! And duct tape! Sounds like we're in for a global financial market conflagration.

"Singer said it may not be big enough to cause a global financial market conflagration." 

Phew, never mind. Cancel that VXX order. 

Maybe I should put all my time and money into Daily Fantasy Sports (DFS)? Or not.

ESPN's David Purdum recounts a story of a high-volume DFS player adjusting at warped speed to late-breaking NBA news and cleaning up in a $400,000 tournament. How did he do it?

"It would have taken a firestorm of keystrokes and clicks to manually adjust 400 lineups in an hour, but a computer script could do that work in no time. Will that kind of computer automation make high-volume traders even more powerful? The vast majority of players don't support that vision, while the biggest game operators, for obvious reasons, are attracted to the larger contests that high-volume players create. Last week, both DraftKings and FanDuel, the two competing industry giants, made decisions benefiting high-volume players. 

It's created a divide and brought us to a pivotal point in the meteoric rise of daily fantasy sports, the micro-version of the traditional season-long rotisserie game that is a suddenly a billion dollar industry. At a time when more eyes are on DFS than ever, are computers taking over the game?" 

Yes, those algos we know and love in equity and options and futures trading have now joined the DFS space in a big way. If it sounds exactly like the path of online poker, well, that's because it's exactly like the path of online poker. Except it's worse in that the house "rake" in DFS is larger, so you're already facing an uphill battle.

There's debate as to whether the scripts actually benefit the users. There are good arguments on both sides.

Let's assume for a second that everyone can access a basic player valuation model. How can it not be beneficial to act quicker and more "optimally" to news? On the other hand, is it necessarily beneficial to create tens and hundreds of lineups? By definition there's a hierarchy to the quality of lineups. 

I think the answer is that, like poker, there are good "bots" and weaker ones. The weaker ones won't have any advantage, but the stronger ones will ultimately outlast all mere humans. 

Yahoo! Inc. (NASDAQ:YHOO) entered the space recently and they have capped the number of entries allowed in certain games, which curtails the advantages of the machines somewhat. Perhaps someone will ultimately outright ban scripts (or at least attempt to; it's not so simple) and just aim for a niche that attracts the lion's share of lower-volume players. 

We shall see.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.