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VIX 'Sell-And-Roll' Volume Explodes, Replacing Equity 'Buy-And-Hold' In The New Normal
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...
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Swan Lake, bitchez!
Minus the finance geek refs to Taleb: VXX sucks as much as AAPL and PMs.
try TVIX-they're going to have to do a 10 for 1 spilt again soon
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.
all accelerating the death of paper promises and paper-pushers, fine by me.
FYI, the paper-pushers are currently winning.
ironic because the deceleration of paper is why Ben Shalom has got this bitch balls-to-the-wall
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...
my AK will still work within any given time frame
That it will :) - but that is another type of precious metal... hahahahaha...
China FX reserves twice the global supply of gold...
I guess it was inevitable that derivatives would become the tail that wags the dog.
does anyone know the value of derivatives vs all the outstanding issued money in the world-don't derivatives dwarf it?
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.
More than ten times actual global GDP...
Dont worry buy gold!
1527.25 post close looks like short term double top??? Yeah, sell VOL.
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?
that old bastard speaks with a forked tongue-he's covered either way
+1...but don't you mean he is covered ALL ways ?
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.
302 million vega. What could go wrong?
302 million in vegas don't go as far as it used to.
Meet you in the buffet!
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...
Al I sit there all day long looking like an exact replica of your avatar.
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.
in response to fonzannoon, and desire for an exact replica of A Huxley pic.
http://i385.photobucket.com/albums/oo298/kenoshamarge/AldousHuxley1-1.jpg
nah man, just sell the heck out of UVXY and buy the dip in GRPN when they fire their CEO. /s
All I know, is that the VIX drama gives me gas, serious gas... enough to make any flatuologist envious...
It's a market where everybody's just trying to drive the fucking steam-roller.
So who is the biggest seller of VIX calls?
I'm becoming VIXated !
I think there is a lot of literature and very little results.
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.
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:
http://stockcharts.com/freecharts/gallery.html?s=vix
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
I'm long on leveraged ETFs. I'll sit aboard the steamroller rather than follow the quants.
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.
trader618