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VIX term structure, contango between VIX and M1, curve flat between M1 and M2. It's been almost two months since we have seen this state.
The VIX opportunity lies where at the point of a phase shift, like now with this flat curve. It will most likely be pulled down, doesn't usually stay flat for long.
Once the M1 M2 gets back into contango, which could happen tomorrow, that will be a green signal for shorting the vol products.
"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk
QOTD "There is a huge disconnect between the money that is floating around in the stock market and the earnings power of the Big Tech companies. There is too much love for Big Tech and too much money crowded in just a few names. This is something we have never seen before. Unfortunately, the more crowding you see in the index, the more volatile the SPX will be as it moves only on the fundamental developments of a few companies. Single stock risk becomes ever more important for the SPX index. That means its volatility will increase. Effectively, the SPX is turning into the FNGS ETF here which only invests in the Top 10 tech names (FANG+). That means VIX levels will remain very elevated going forward, certainly much higher than the levels we saw in 2019. 30 is not going to be a ceiling for the VIX in 2020. More like a floor." [emphasis mine]
VIX curve has a very strange shape but front to back there is now a
slight contango, and 3.72% in the front two months, so that's the
signal for short VXX.
This month expiration is a week later, so it's not this Wednesday
but the following one.
"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk
The question about that bump in the term structure around October -- is it overstated? Neither Biden or Trump would be a bad outcome for the market. Warren would, but not those two.
"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk
