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VIX Contango Piledrives Levels From Last Pre-Market Peak

Tyler Durden's picture




 

On April 15, the VIX contango hit its heretofore steepest of the year. What happened immediately afterward was a peak in the market followed by a plunge, and the flash crash, coupled with a massive flattening of the curve. What also happened was unprecedented pain for Goldman, which had been pushing the Variance Swap so hard, it ended up with residual inventory on its flow (but not prop) desk, resulting in a major loss for the firm once the curve flattened. Yet anyone who thought that Goldman's Delta One prop desk would ever lose money, should just look at today's ridiculous VIX curve which is now trading at a steepness unseen in years. More than obviously someone is pushing very hard on the spot, while ignoring or buying the mid and long end. And as we expected earlier this week, the only driver for stocks right now is what is happening in VIX land, driven by the near record open interest, which is now so disconnected from the volatility in all other assets (FX, bonds), it is beyond deplorable. Yet perfectly expected: with no volume, one market maker can do with the market entirely as they see fit.

 

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Fri, 12/17/2010 - 15:14 | 813579 goldmiddelfinger
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VIX futures are a derivative of a derivative of a derivative

 

 

Fri, 12/17/2010 - 15:30 | 813625 Sophist Economicus
Sophist Economicus's picture

...of an engima wrapped as a derivative

Fri, 12/17/2010 - 15:53 | 813685 goldmiddelfinger
goldmiddelfinger's picture

..inside a burning paper bag found on your doorstep after the doorbell has mysteriously rung

Mon, 12/20/2010 - 05:35 | 818268 Ratscam
Ratscam's picture

filled with dog shit in case you try to stop the fire by stepping on it

Fri, 12/17/2010 - 15:56 | 813696 GoinFawr
GoinFawr's picture

...surrounded by a Chinese puzzle-box

Fri, 12/17/2010 - 16:25 | 813766 Sophist Economicus
Sophist Economicus's picture

...contained by a conundrum

Fri, 12/17/2010 - 16:42 | 813821 Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

then wrapped in a pizza and deep fried.

Fri, 12/17/2010 - 16:59 | 813866 Bill Lumbergh
Bill Lumbergh's picture

...and eaten by Harry Wanger.

Fri, 12/17/2010 - 17:20 | 813929 The Mummy
The Mummy's picture

... and then Wanger's poop is sliced, mixed in with other poops, and the derivatives of the new slices are sold to Geitner.

Fri, 12/17/2010 - 15:19 | 813592 scatterbrains
scatterbrains's picture

anyone have any thoughts on how one might best play this?

Fri, 12/17/2010 - 15:20 | 813598 traderjoe
traderjoe's picture

Take physical delivery of gold and silver, have 30 days of dehydrated food on hand (and water and other staples and medicine), and have some brass, lead to defend one's home. 

Fri, 12/17/2010 - 15:22 | 813600 scatterbrains
scatterbrains's picture

allready there, except switch out the dehydrated food for garden grown home canned food.  :P

Fri, 12/17/2010 - 16:44 | 813831 A_MacLaren
A_MacLaren's picture

Knowledgeable preppers recommend both food sources.

Bad harvest contingency hedge = LT storage dehydrated.

Fri, 12/17/2010 - 16:53 | 813854 flacon
flacon's picture

I bought mine from yourfoodstorage.com. Get a year supply at least. 

Fri, 12/17/2010 - 17:04 | 813877 trav7777
trav7777's picture

you forgot the surgeon to deal with your inevitable bullet wounds.

All the brass/lead madmaxers...how many gunfights do you think you'll get into before catching one?  You may win the battle but die a few days later.  Not a victory.

This is why wild animals rarely fight for real.

Fri, 12/17/2010 - 22:02 | 814654 El Hosel
El Hosel's picture

  "This is why wild animals rarely fight for real."

          I love wild animals, they are delicious, smart,  and they don't shoot back.

Sun, 12/19/2010 - 07:53 | 816741 mogul rider
mogul rider's picture

how many gunfights do you think you'll get into before catching one? 

One, I have a significant piece of equipment which 1000 rounds a minute with a 3000 clip.

 

They won't make it by the gate

Oh did I mention the motion sensor activated gatling guns on 3 turrets?

 

Again, the zombies are toast.

Fri, 12/17/2010 - 15:38 | 813645 Jones79
Jones79's picture

buy a strip (all expiries shown on the chart--don't know if there is an exchange-defined strip) of the vix futures, or just spread a front month vs. a back month (buy the prompt month and sell a few months out).  it should flatten from here, and the front end should go up more than the back end. 

Fri, 12/17/2010 - 16:41 | 813813 Frederic Bastiat
Frederic Bastiat's picture

Before you play it, you need to disagree.  The market is saying, there's no vol in equities now, but there will be.  I happen to agree--might not be steep enough.

Fri, 12/17/2010 - 15:19 | 813594 Ferg .
Ferg .'s picture

Vix is at levels not seen since July of 2007 . Volume continues to crumble . It's all getting more than a bit silly really . 

Oh , and slightly off topic , have a look at this . Got the link from Jamie Saettele at DailyFX . Hilarious  !

http://www.businessinsider.com/gold-dispensing-atm-boca-raton-gold-to-go-2010-12

Fri, 12/17/2010 - 15:20 | 813595 SDRII
SDRII's picture

Since on topic may perhaps this deserves a look and comment...ergo price vs. value

http://fridayinvegas.blogspot.com/

Fri, 12/17/2010 - 15:34 | 813639 traderjoe
traderjoe's picture

They don't like ZH over there too much. 

Sun, 12/19/2010 - 11:30 | 816847 KidDynamite
KidDynamite's picture

note - it's bad information given to millions of readers that I don't like. the post in question, by the way, is here:

 

http://fridayinvegas.blogspot.com/2010/12/so-you-want-to-understand-s-fu...

Fri, 12/17/2010 - 15:27 | 813615 TradingJoe
TradingJoe's picture

SuperMorons who are buying stocks at these levels! I also would wait to buy more of the PMs at a lower price, we'll get there, give it a little time, eh!

Fri, 12/17/2010 - 15:56 | 813698 goldmiddelfinger
goldmiddelfinger's picture

what pm?

Fri, 12/17/2010 - 16:18 | 813757 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Get where?  Buy the f@*&in' dip!

Fri, 12/17/2010 - 15:27 | 813617 haskelslocal
haskelslocal's picture

Someone mind "nutshelling" topic while leading us horses to water?

Fri, 12/17/2010 - 15:31 | 813630 Waterfallsparkles
Waterfallsparkles's picture

They got rid of the Day Traders and now they have the Market to themselves, to do with as they please.  The no volume melt up, trading pennies all day to flatline the stocks.  Sub penny quotes.

I do not think they want individual traders in the market anyway.  They only want the Big Boys to play.  The Mutual Funds do not panic and will support a Stock.  Day Traders would panic and throw them off kilter.  Always was a Big Boys Club and now they have it all to themselves.

I suppose prices will go higher but I would not put my Money on the line at the prices so many of the Mo Mo stocks are at today.  Yes, with the FED printing money until June I do think Aapl will get over the $400. mark, Amzn and Netflix will also probably still rocket but not with my particiaption.  I got burnt too many times trying to buy High.

Fri, 12/17/2010 - 17:03 | 813872 Saxxon
Saxxon's picture

Two ongoing fallacies:

1.  That the FED or anyone else gives a damn about daytraders.  The seas are full of Leviathan daytrading entities already.  The little guy traders, whom I think we are talking about here, never added up to much post-1999.  If anything the brokers would want daytraders for the commissions and the dumb money.

2.  That a little guy daytrader cannot make money in this big, bad manipulated market.  That's just sour grapes.  The market is always rigged, always manipulated.  You can make money off swings regardless of what is causing the swings.

Fri, 12/17/2010 - 22:22 | 814692 El Hosel
El Hosel's picture

    "I do not think they want individual traders in the market anyway"

  Waterfall,

       They don't want a "market" at all, they want stocks up no matter what. It is policy for now to pump up stocks....in the big indices it is all Robo all the time and the robos are programed to go green. 

     The SPY at 1200 has gone nowhere in 12 years. The bankstas in charge are up huge along with the politicians and regulators.

 

Fri, 12/17/2010 - 15:34 | 813638 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

PMs f@#%in' crushing fools today.

Fri, 12/17/2010 - 16:23 | 813765 GoinFawr
GoinFawr's picture

I can sense some are feeling a bit of  squeeeeeeeeeeeze right now.

Fri, 12/17/2010 - 15:43 | 813644 Cdad
Cdad's picture

Just as the conversation of Creation Units Machines is so incomprehensible, so too is the notion that you can sell upside calls on "risk" while simultaneously shorting mid term puts on "complacency", but hedge yourself by buying VXX call options [which I think is a derivative of a derivative] so that you can go ahead and naked short the crap out of spot...which is against the law but so what...

...all causing the S&P, which is entirely driven by the Roach Motel [SPY] to SIT UP ROLL OVER and PLAY DEAD...all in an afternoon with the criminal syndicate known as Wall Street partying on at the OPEN BAR...

If you get the same feeling I get, then you get the sense that INVESTORS [lol] simply have no business being part of this market...which is probably why they keep pouring out of the stock market week after week, and why The Bernank keeps on printing dollars and stuffing them into syndicate banks...

...and why the Blow Horn focuses on Black Friday and Self-gifting...while SEC agents surf porn...and M. Shaprio sits in meetings with  K. Langone and L. Blankfein [and such] to learn which laws she should enforce and which laws she should ignore..while the criminal syndicate bankers cash $100 million bonus checks....

...as Average Joe pays $3+ at the pump for Christmas because the USO is doing its part to prop up the Roach Motel [SPY]...which is why I am sitting under a pile of winter coats in my closet posting from my computer which is plugged into non-gov't-conforming plug and feeling OK about FBI guys NOT finding me because they are somewhere in PA busting some low-level criminal syndicate Wall Street banker grunts [wearing hockey helmets] because that is easier than taking on the fact...

THAT OUR ENTIRE BANKING SYSTEM HAS A MASSIVE, SYSTEMIC PROBLEM, AND AS LONG AS IT STAYS THAT WAY, real capital [lol] CANNOT FORM IN INSTITUTIONS THAT REMAIN AS CORRUPT AS THESE.

Do I have all that right?

Additional:

I did not even get to $11 burritos, PEs of infinity, or drug companies that suck at getting their new drug ideas approved...which I would like to be debating IF the whole damn thing was not so obviously evidence that we are all Freakin' Doomed no matter what...

Fri, 12/17/2010 - 15:53 | 813683 Waterfallsparkles
Waterfallsparkles's picture

C dad, too funny.  I too am sitting in my house at 58 degrees with socks, an overcoat of sorts.  Although, that is warm as I turn it down to 52 degrees at night.  $305. for 100 gallons of Oil just does not go that far.  As far a driving, I am lucky that I live about 1 mile from a small shopping center with a Grocery, Drug, Liquor, McDonalds, etc. store.  Do not have to go far to get what I need.

Fri, 12/17/2010 - 16:12 | 813739 Cdad
Cdad's picture

Waterfallsparkles,

Are you at all related to UnicornDew?  Just asking.

Good luck out there, brother.  This complete fiction cannot remain in place much longer IMO.  As it gets colder....

Cdad

Fri, 12/17/2010 - 16:39 | 813790 Waterfallsparkles
Waterfallsparkles's picture

No Cdad not related.  I do live off fixed income. 

Fri, 12/17/2010 - 16:47 | 813835 Cdad
Cdad's picture

Waterfallsparks,

That all sucks and I am sorry for your trouble.  Of all the things I have done in my life, I was only good at two things:  teaching...and timing my real estate sales....but I have friends who are in your position, as well...so I know who bad that sucks.

I guess what folks do is simply decide which bills to stop paying first.  In your case, heat...which also sucks.  Where the local tax assessor comes in there...I suppose that is the hard question.

But it is my duty...not because of any contracts but out of decency sake...to tell you that things are probably going to keep on sucking really bad [in the event that you did not already know]...and maybe really even worse...as the fiction of our economy is starting to read like a pop up book, if you know what I mean.

And as for my comment about UnicornDew [and I thought about trying PixieDust], please forgive how I had a little joke at your expense...because I have been in this closet all day not really even wanting to see how expensive some burritos can get on a day like this...which also sucks.

Respectfully,

Cdad

 

 

Fri, 12/17/2010 - 17:34 | 813952 Waterfallsparkles
Waterfallsparkles's picture

I deleted most of my post.  People would not feel sorry for me owning Rental Real Estate.  But the truth is that the shoe maker does not have shoes for his children.  If things are lean you have to take the brunt of the downturn.  The Rental Properties have to be in pristine condition and where you live tends to go into the toilet.  Including cutting back on heat.  Tenants have it but you may not.  I know that last year I was paying about $1,000. per month for utilities on vacant properties.  That sucks.  Most are 2 apts and if you have one Tenant you have to provide the heat and electricity for the other. 

Plus, after the spike in prices 3 years ago my Property Taxes went up about 150%.  I had one property that went from $3,000. per year to $7,100. per year and another that went from $3,300. a year to $8,500.  There is no way you can make that much up in rent.  I tried and lost all of my Tenants.  Ended up with 8 to 9 months of vacancy. The increase was close to $10,000. per year increase in property taxes.  They do not give you a break on Property Taxes if you are a Landlord.  They can raise them as much as they want. 

Although, in retrospect, I am so glad to be invested in Real Estate instead of the Stock Market.  Yes, my Properties have lost value but I still can get a decent return and they are not going anywhere.  Eventually they will return to the prior value.  It may take 5 or 10 years but so be it.  Mean time I do not have to pay exorbitant taxes.

 

Fri, 12/17/2010 - 17:23 | 813942 Monday1929
Monday1929's picture

More please on the $11.00 Burritos.

Fri, 12/17/2010 - 15:46 | 813670 Waterfallsparkles
Waterfallsparkles's picture

Well, another thought.  It is easy for Banks and Mutual Funds to buy overvalued Stocks.  It is not their Money on the line.  If they lose someone else takes the consequence of their bad bets.  Plus, the Fed has made it impossible for any of the Banks or Mutual Funds to invest anywhere else.  So the FED has created its own Monopoly Money of sorts. The too Big to Fail Banks have the implicit guarantee from the FED that they will not fail.  They will just print Money and stick it to the Tax Payer, no matter what.

Fri, 12/17/2010 - 16:54 | 813852 InExile
InExile's picture

Buy for the mandate.  PA is different.

Fri, 12/17/2010 - 16:02 | 813712 dan10400
dan10400's picture

What is typically the difference between the front/mid/long ends of the volativity curve?  Any idea what this looked like back in August?

Fri, 12/17/2010 - 16:10 | 813734 Cdad
Cdad's picture

I'm not sure on the first question.

I'm not sure it matters on the second question.

Right now, I see a few roaches at the back door of the Roach Motel...and if any FBI agents have been listening in today on ZH...then the VXX Creation Units Machine could be unplugged at any second, causing Volitility to SUDDENLY experience market forces...you know...known human, Earth-like market forces.  And anyway, NO ONE picked up Ms. Euro or gave her an Altoid today...so...?

Which is to say....who knows? 

Fri, 12/17/2010 - 16:06 | 813722 Tense INDIAN
Tense INDIAN's picture

sometimes i think all these analysis and charting ...wont give much of a clue to the next market crash .....but something completely unrelated event...........Some ZHers might know this.....some anonymous blogger in some google forum PREDICTED EXACT DATE of the 2008 crash(SEP 15)  .........this has been quite hotly debated in the blogosphere....

 

 MOST PROBABLE DATE of next CRASH=====>>>>FEB 7 2011

Tyler , i think u better analyse these dates and past events......heres the link to site discussing that PREDICTION:::

http://z10.invisionfree.com/The_Unhived_Mind_II/index.php?showtopic=43942

this is the original thread:

 

http://finance.google.com/group/google.finance.983582/browse_thread/thread/aad550b590f931bf

 

Anyone could have made that prediction right....but his account was linked to another prediction in October 2007:---

 

http://groups.google.com/group/alt.politics.bush/browse_thread/thread/9cd47ee4ee49281/32f308c3917b6a71?lnk=st&q=#32f308c3917b6a71

 

 


Fri, 12/17/2010 - 16:44 | 813823 Dingleberry Jones
Dingleberry Jones's picture

Interesting stuff. We'll see what happens in early February...

Fri, 12/17/2010 - 16:57 | 813864 AGoldhamster
AGoldhamster's picture

check this out: http://www.enterprisecorruption.com/

scroll down

Fri, 12/17/2010 - 17:55 | 813997 squexx
squexx's picture

Interesting, I followed his email to that site and was going to post it. Evidently, he has a $105.00 subscription rate to his blog and past material. Here is a whois search on that website.

http://www.whois-search.com/whois/www.enterprisecorruption.com

Domain Name: ENTERPRISECORRUPTION.COM

   Created on..............: 2007-07-30 02:09:35 GMT
   Expires on..............: 2011-08-30 23:13:26 GMT
   Last modified on........: 2010-09-01 13:07:03 GMT

Registrant Info: (FAST-12785240)
   Bluehost.com
   Bluehost Inc
   1958 South 950 East
   Provo, Utah 84604
   United States
   Phone: +1.8017659400
   Fax..: +1.8017651992
   Email:  Email address protected from spam harvesters
   Last modified: 2010-12-06 18:43:32 GMT

 

 

Fri, 12/17/2010 - 17:44 | 814003 flacon
flacon's picture

...scroll down.... to where? What is it that you are trying to point us to? 

Fri, 12/17/2010 - 19:23 | 814221 AGoldhamster
AGoldhamster's picture

seems that that is his site - and he (reinhardt) is also posting there ... see 12.15.10, so why not ask him about that date

Fri, 12/17/2010 - 16:14 | 813745 AGoldhamster
AGoldhamster's picture

From low VIX and "risk off", as usual, to Gold: Gold today broke this weeks downtrend - now back up north?

Or will Blythe attack once more next week towards metal futures OE?

Fri, 12/17/2010 - 16:15 | 813750 dlsamg
dlsamg's picture

Question? Say something happens to the Fed. Ron Paul audits and we find out the Fed has taken the long side of everything without any hedges and Congress shuts them down or Ben gets replaced by a fiscal conservative who won't print more money. Is there a fail to deliever or counterparty risk in taking the short side of any trade in this situtation?

Fri, 12/17/2010 - 17:30 | 813964 Monday1929
Monday1929's picture

There is a huge chance that shorts will not get paid in the next crash, not having anything to do with the Fed. And who will take your side- you will be labeled an evil speculator.

Fri, 12/17/2010 - 22:48 | 814740 dlsamg
dlsamg's picture

Futures contracts are mark to market at the close to avoid counter party risk and have a limit down. I know this is not total protection but my concern is if the Fed is hugely long and when it has massive losses and is not allowed to print any more to cover them who is  going to take that loss or loss of the gain they thought they would have. I think markets would discount this and price it over time rather than it being an overnight collaspe. That would allow one to be pulling their cash out before the Fed fails. What other reasons do you think could cause counter party risk in the futures markets? That's the only thing I trade.

Fri, 12/17/2010 - 16:17 | 813756 Dingleberry Jones
Dingleberry Jones's picture

So you are saying that there is hope that my 110 Dec 31 SPY puts will end up not underwater? :)

Fri, 12/17/2010 - 16:42 | 813817 A_MacLaren
A_MacLaren's picture

Volatility? What volatility?

Fri, 12/17/2010 - 16:45 | 813828 Robslob
Robslob's picture

Thought one: POMO Thought two: 10x more corruption so I need to see 10x more fucktardness before shorting 2x more...

Fri, 12/17/2010 - 17:36 | 813979 mberry8870
mberry8870's picture

Don't worry conceptually the same thing as CDO^2. Nothing wrong there. Move along.

Fri, 12/17/2010 - 18:32 | 814108 boeing747
boeing747's picture

People are dumping long term bonds even with the help of Irish Spain show. To furnish 1.5Trillion for debts issued next year and entire world is running out of cash, Ben may have to crash stock market 4000 points to raise 1.5T. Watch out early next year when everybody is looking for safety. Happy New Year!

Fri, 12/17/2010 - 23:14 | 814794 TexDenim
TexDenim's picture

Does history repeat itself? Apparently so. First as tragedy, and then as farce. If GS gets fucked, I will not cry for them. This market will crash after the New Year. Maybe before.

Sun, 12/19/2010 - 10:02 | 816803 Itsalie
Itsalie's picture

vix futures - a really useful financial "innovation" - and as entertaining as betting on dog racing in Macao (with results just as delightful or painful choosing from the fishtank of the neighbourhood casino)

 

Sun, 12/19/2010 - 10:10 | 816809 danimal
danimal's picture

"More than obviously someone is pushing very hard on the spot" Uh, the spot doesn't trade, as the vix is a statistic.

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