Play close attention when S&P and VIX both move higher
Play close attention when S&P and VIX both move higher
Yesterday was one of those days, although not too extreme given we had the weekend effect.
Frequent readers of TME know we tilted to buy "optionality" logic last week. There are several arguments to be made for such a long volatility preference, but volatility, use it for hedging or speculation has got cheap, both relative to moves and especially given the fact where we have moved and the still great uncertainty prevailing.
Long volatility stance does not necessarily mean markets must crash, but we like expressing views with relative cheap options here.
People have been "sucked into" chasing the rally lately, chasing laggards and many "big guys" we speak to are simply "forced into deploying risk" into this market, irrespective of their views (you can't underperform for too long).
There are several "easy" strategies to consider here, even for the "stressed out" long player. Why not replace longs with relatively cheap upside calls.
You will miss a few percent should this continue higher, but in case it rips much higher, you will be on side.
For the "must have longs" player, downside hedges are becoming interesting here. We have Fed coming up, earnings season kicking in soon as well as the many global possible risks flaring up again.
We shared the view of our top contra indicator, the "VIX guy", last week, and he has so far had 99% accurate forecasts the inverse way...
Yesterday was one of those days, although not too extreme given we had the weekend effect.
Frequent readers of TME know we tilted to buy "optionality" logic last week. There are several arguments to be made for such a long volatility preference, but volatility, use it for hedging or speculation has got cheap, both relative to moves and especially given the fact where we have moved and the still great uncertainty prevailing.
Long volatility stance does not necessarily mean markets must crash, but we like expressing views with relative cheap options here.
People have been "sucked into" chasing the rally lately, chasing laggards and many "big guys" we speak to are simply "forced into deploying risk" into this market, irrespective of their views (you can't underperform for too long).
There are several "easy" strategies to consider here, even for the "stressed out" long player. Why not replace longs with relatively cheap upside calls.
You will miss a few percent should this continue higher, but in case it rips much higher, you will be on side.
For the "must have longs" player, downside hedges are becoming interesting here. We have Fed coming up, earnings season kicking in soon as well as the many global possible risks flaring up again.
We shared the view of our top contra indicator, the "VIX guy", last week, and he has so far had 99% accurate forecasts the inverse way...