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When near-term VIX exceeds longer-term VIX (VIX/VIX3M ratio above 1.0). Signals market stress — unfavorable for selling premium.
⚡ KEY TAKEAWAY: Market is pricing more fear now than later. Reduce size, tighten stops, or sit out until contango returns.
Term Structure
Contango = normal, good for sellers. Backwardation = market stress, reduce position size or wait.
Contango
Normal state = green light for sellers. VIX/VIX3M below 0.9 means term structure strongly supports premium selling.
VIX (Volatility Index)
VIX 15–25 is the sweet spot for premium sellers — enough fear for rich premiums, not enough for gap risk.
VIX3M
Watch VIX/VIX3M ratio, not VIX alone. Ratio below 1.0 confirms the market isn't panicking short-term — safer to sell.