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VIX guy is back...and he is very calm - time to buy volatility

The Market Ear Picture

Believe it or not - the VIX guy just called us again

We didn't expect the VIX guy to call us only a month after his latest call. Recall what we wrote on Nov 30 (here): "We have been waiting for the panic call from our VIX guy. Earlier today he called us and we haven't heard him in such a panic mode in a long time. His latest logic is based around the vaccine news from Moderna, the recent VIX spike "can't you see the stress bro?" and that people had a great year and will sell etc. His main idea was to buy VIX here. Needless to say we are starting to sell volatility here. One way to play it is via put spreads in VIX. After all, volatility is mean reverting and our VIX guy has continued holding the perfect 100% inverse track record. Will he nail it again?"

Since then we have seen the VIX crash. If you played the logic from above you have some nice profits to book (overdue). Anyway, his latest logic is basically the inverse of what he said in late November. He has also managed picking up the January effect logic and argues for this market to remain trending higher with diminishing volatility. We did not plan to get excited on the last day of the year, but given his perfect track record, executing the first part of the planned long volatility trade suddenly seems like a good idea. For the dynamic hedging mind, why not look at replacing longs with upside calls and/or exploring put spreads as a hedge (skew is high).