Vol Curve Mangling Continues As March Debt Ceiling "Drop Dead" Day Looms

Tyler Durden's picture


We explicitly noted that the purchase of vol steepeners across the debt-ceiling deadlines was the short-term trade as soon as the ATRA deal was approved. In the brief period since, the VIX term-structure has smashed from its flattest (most inverted) in 2 months to its steepest now in 5 months as hedgers roll out to March and beyond. Of course, all algos know is that they can lever VXX (and other synthetics) in the short-term to ramp equities higher - and sure enough the S&P 500 just hit highs above the highest close since December 2007.


Spot and futures curve steepening...





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Fri, 01/04/2013 - 16:32 | 3123608 fuu
fuu's picture

It's like 2007, again.

Gold fixed at 836.50 on 12/31/2007. 1648.00 today.

Fri, 01/04/2013 - 16:49 | 3123694 spastic_colon
spastic_colon's picture

<---------- we see ES 1600 before 1250

<---------- vice versa


Optional - we never see 1250 again

Fri, 01/04/2013 - 16:59 | 3123734 Manthong
Manthong's picture

“March Debt Ceiling "Drop Dead" Day Looms”

Something about that message sounds familiar.

Fri, 01/04/2013 - 17:07 | 3123774 SheepDog-One
SheepDog-One's picture

'Drop dead day'....wow so dramatic....when in reality what will happen is they'll just remove the ceiling and hike us another tax increase then say 'We saved you ungrateful peasants, again, now get back on those oars and ROW DAMMIT!

Fri, 01/04/2013 - 17:32 | 3123883 TraderTimm
TraderTimm's picture

Precisely SheepDog-One.

Which is also why my enthusiasm for "deadlines" and "D-Day" type of dates is waning. They just get to the edge and move the goalposts. Never mind that recently disturbed dirt and earth-mover tracks, just focus on how FAR away the goal is now.

I am completely disgusted by the whole process.

Fri, 01/04/2013 - 16:53 | 3123714 HedgeAccordingly
HedgeAccordingly's picture

VIX was in single digits for 10 years in 90s - XLF traded over 17 and now we got JPM approaching multi year highs..


Fri, 01/04/2013 - 17:57 | 3123890 kaiserhoff
kaiserhoff's picture

Great piece, Tyler.  Could you flesh out the mechanism in some future article?  I know a couple of ways a higher vix might have that effect, but I'd like to know what traders are doing to force it in that direction.

Fri, 01/04/2013 - 17:08 | 3123775 chubbar
chubbar's picture

Everyone who would like to tell Congress to lay off the gun ban routine, please follow this link to the "take action" center and there is an already filled out email if you fill in your area code and personal info. Please inundate these assholes trying to circumvent the constitution!


Fri, 01/04/2013 - 17:10 | 3123793 persu
persu's picture

So all you goldbugs....

Where is gold

Fri, 01/04/2013 - 17:15 | 3123815 fuu
fuu's picture

Since December 2007? Just about double.

Fri, 01/04/2013 - 17:17 | 3123824 earleflorida
earleflorida's picture

at a great entry point for those whom haven't stacked enough

Fri, 01/04/2013 - 16:37 | 3123635 Banksters
Banksters's picture

All the variables  stock jockeys talk about- see how to value equities, are meaningless parameters.   If the fed raised interest rates a half a point and ceased QE4eva the market would drop 2000 pts.   



Fri, 01/04/2013 - 16:55 | 3123673 SheepDog-One
SheepDog-One's picture

Exactly, just HALF a point and we'd see pure market panic and edifice crumbling back to lows. In reality, they've got jack fuck-all except 100% manipulated markets by machines higher and the daily sausage grinder media whore team carrying it all out for them. 

Fri, 01/04/2013 - 19:43 | 3124180 derek_vineyard
derek_vineyard's picture

but the stock jockeys are banking that the fed won't .... so they ignore the macro and trade micro and hope they can know when to bail (which almost none will)

Fri, 01/04/2013 - 16:36 | 3123636 Motorhead
Motorhead's picture

VIX, bitchez!

Fri, 01/04/2013 - 16:37 | 3123638 Banksters
Banksters's picture

Buy and hold!

Fri, 01/04/2013 - 16:41 | 3123653 LouisDega
LouisDega's picture


Fri, 01/04/2013 - 17:19 | 3123830 Pareto
Pareto's picture

.........to zero before it hits 80.

Fri, 01/04/2013 - 16:40 | 3123644 SmoothCoolSmoke
SmoothCoolSmoke's picture

I do not know how many times I've said, in the past 4 years:"There no way they can keep taking this thing higher".  I'm there again..... I cannot logically think anything but being short is the only choice.  I mean there is no way Obama smashes the DC with an Executive Order and stocks do a FC fix repeat.  No way.....right?


Fri, 01/04/2013 - 16:42 | 3123655 LongSoupLine
LongSoupLine's picture

Fucking crooks and their fucking algotards ramping the close.

Fuck all of them straight to ass billed prison. Fuckers.

Fri, 01/04/2013 - 16:48 | 3123685 optimator
optimator's picture

Please, not just any prison, but Plötzensee Prison.

Fri, 01/04/2013 - 17:00 | 3123745 The Joker
The Joker's picture

Pound them in the ass prison.

Fri, 01/04/2013 - 16:44 | 3123665 SheepDog-One
SheepDog-One's picture

'Drop dead day'...YEA RIGHT! What will they do besides another 11th hour emergency session and vote us another 2% tax increase and declare 'We SAVED you!' then they can tack on another +400 to the DOW?

Thats all.

Fri, 01/04/2013 - 16:47 | 3123679 vote_libertaria...
vote_libertarian_party's picture



I just keep looking into the future with the prospect of chuckling everytime somebody will say 'Who could have seen this coming".



Fri, 01/04/2013 - 16:56 | 3123710 SheepDog-One
SheepDog-One's picture

One of these mornings, they'll all be saying it, 'NO ONE saw this coming! We're all 'OMG-in' up in here! SAVE US somebody SAVE US!!''

I'll be doing far more laughter than just chuckling myself. I'll be speed dialing all the fucktard equity worshippers I know, and there's plenty!

Fri, 01/04/2013 - 16:50 | 3123698 SheepDog-One
SheepDog-One's picture

HEY guys....only about 7 more trading days at this rate until ALL TIME record market highs are breached! HOORAYS! <:D

Fri, 01/04/2013 - 16:55 | 3123716 Tsar Pointless
Tsar Pointless's picture


Stawks at highest closing level since 2007.

Enjoy the NFL playoffs. Bitchez.

Go Pats!

Fri, 01/04/2013 - 16:58 | 3123733 SheepDog-One
SheepDog-One's picture

Then, we gots da jobs! Then we said 'YAY!!'

Only 7 trading days from here till all-time record bubble highs are PASSED! And all it took was adding about $30 trillion in new debt! 


Fri, 01/04/2013 - 17:00 | 3123741 surf0766
surf0766's picture

Dow 20,000 with 75 million on food stamps and 40 million on u-6 unemployment !. Ain't centrally planned marxism great !

Fri, 01/04/2013 - 18:59 | 3124093 W74
W74's picture

And no guns.  Didn't the famine of 1933 happen right after Stalin took guns away from the Ukranians?  Didn't Hitler solidify power after removing guns from everyone not allied to his cause?  It won't be Obama 4.1 years from now folks, it'll be someone far worse.  They're merely setting the stage.

Fri, 01/04/2013 - 17:22 | 3123843 bidaskspread
bidaskspread's picture

Let's do the Contango.

Fri, 01/04/2013 - 17:39 | 3123908 Glass Seagull
Glass Seagull's picture


Hallmark of efficiency, these markets.

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