VIX 'Sell-And-Roll' Volume Explodes, Replacing Equity 'Buy-And-Hold' In The New Normal

Tyler Durden's picture

With the heavy central-planning boot of repression on the neck of any and all realized risky asset volatility, it is perhaps no surprise that investors, professional and amateur alike, have been dragged into the latest yield-enhancing 'scheme' of being short front-month vol and earning the premium. Bernanke has created a world of insurance providers - who are fundamentally under-capitalized when the big one hits - as record high levels of net short positions, record volumes, and extreme beta to stocks leave the bevy of option premium sellers still consistently picking up nickels in front of that steam-roller. Of course, as Taleb reminds, suppressing volatility actually makes the world a less predictable and more dangerous place - though for now, it seems, everyone and their eTrade baby is willing to follow Kevin Henry down the vol-premium selling route until of course that steam-roller tears more than just an arm off (given the massive and levered exposure to this market now). Instead of equity 'Buy-and-Hold'; the new normal is 'Sell Vol-and-Roll.


VIX futures and options monthly average volumes are exploding...


As daily volumes surge to record levels currently - especially in the front-month...


As the madding crowd shifts their attention to selling front-month vol as the most consistent and profitable strategy


And with both spot VIX and the front-month future now extremely high beta to stocks, what could go wrong for these levered net longs?


Perhaps a re-read (as we just reminded of Minsky's stability leads to instability' idea) of Taleb's beief FA article is worth while...


Nassim N. Taleb — The Black Swan of Cairo by cairowire

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Motorhead's picture

Swan Lake, bitchez!

slaughterer's picture

Minus the finance geek refs to Taleb: VXX sucks as much as AAPL and PMs.

otto skorzeny's picture

try TVIX-they're going to have to do a 10 for 1 spilt again soon

FreeMktFisherMN's picture

try RGR and SWHC. The former has minimal debt and the latter has plenty of dry powder to cover its liabilities. Their only problem it seems is capacity to produce to meet the demand.

LawsofPhysics's picture

all accelerating the death of paper promises and paper-pushers, fine by me.

Water Is Wet's picture

FYI, the paper-pushers are currently winning.

otto skorzeny's picture

ironic because the deceleration of paper is why Ben Shalom has got this bitch balls-to-the-wall

Praetorian Guard's picture

Unfortunately, the death of paper is literally the death of the world! Weimar globally and merging to PM's or anything else won't work within the time frame... you think your rights are diminished now, yea...

otto skorzeny's picture

my AK will still work within any given time frame

Praetorian Guard's picture

That it will :) - but that is another type of precious metal... hahahahaha...

ATG's picture

China FX reserves twice the global supply of gold...

busted by the bailout's picture

I guess it was inevitable that derivatives would become the tail that wags the dog.

otto skorzeny's picture

does anyone know the value of derivatives vs all the outstanding issued money in the world-don't derivatives dwarf it?

busted by the bailout's picture

Don't think about it too much.  Like infinity, trying to comprehend it can blow your mind and leave you in a vegetative state until expiration on the final triple-witching day.

ATG's picture

More than ten times actual global GDP...

carlsbro's picture

Dont worry buy gold!

rubearish10's picture

1527.25 post close looks like short term double top??? Yeah, sell VOL.

asteroids's picture

So instead of buy and selling a stock, you are buying and selling the rate of change of a stock (ie a derivative). Didn't Buffet say derivatives were mass weapons of financial destruction?

otto skorzeny's picture

that old bastard speaks with a forked tongue-he's covered either way

therover's picture

+1...but don't you mean he is covered ALL ways ? 

flacon's picture

Options are only one kind of derivative. All paper money is another, but the biggest derivatives are Credit Default Swaps - and those are nothing like options or paper money. 

Glass Seagull's picture

302 million vega. What could go wrong?

machineh's picture

302 million in vegas don't go as far as it used to.

Meet you in the buffet!

Al Huxley's picture

And here everybody thought for so many years that the way to make money in the markets was 'invest capital in good companies so they can go out and make stuff and sell it for profit'.  How foolish we all were for so many years.  This new economy stuff is fantastic...

fonzannoon's picture

Al I sit there all day long looking like an exact replica of your avatar.

Al Huxley's picture

This is all going to end sooo badly, but I've given up trying to even guess how long the madness will continue.  At this point, I think it's better that it just does continue, because I'm pretty sure when it breaks, it's going to be terrible for everyone, even people who see it coming and have tried to prepare.

Fíréan's picture

 in response to fonzannoon,  and desire for an exact replica of A Huxley pic.


FreeMktFisherMN's picture

nah man, just sell the heck out of UVXY and buy the dip in GRPN when they fire their CEO. /s

Praetorian Guard's picture

All I know, is that the VIX drama gives me gas, serious gas... enough to make any flatuologist envious...

Smuckers's picture

It's a market where everybody's just trying to drive the fucking steam-roller.

swissaustrian's picture

So who is the biggest seller of VIX calls?

Fíréan's picture

I'm becoming VIXated !

Stock Tips Investment's picture

I think there is a lot of literature and very little results.

Theos's picture

Im sorry but who in their right mind takes the bet that the future will, on average, be more certain than the present.


VXX et al are garbage products and should be shorted.

ATG's picture

All the leveraged Volatility ETFs/ETNs suckers bets dewsigned to compound reset to zero, like options can do until the largest nakeds are written at point of maximum risk.

VIX target 23.5: 

Joshua Falken's picture

There are so many private and institutional vol sellers, when the next 1987, 2000 and 2008 crisis comes along, all those short teenies are going to wipe out hundreds and thousands of bit players.

The main money trick has always been knowing when to buy back short vol and go long.

"Extend and pretend" has made greedy people complacent as Nick Leeson found out

GFORCE's picture

I'm long on leveraged ETFs. I'll sit aboard the steamroller rather than follow the quants.

Grand Supercycle's picture

DXY daily chart retracement & DOW  daily megaphone wedge confirmed thus more equity upside while DXY retraces from current overextended level.

Bullish warning for DXY monthly long term chart continues and this will not change.