On Friday, the VIX and skew both kept winding their way higher.? Stocks in general were a mixed bag, with the SPX down .3% or so.? The darlings got hit (FB, PCLN), but a good chunk of stocks were up on the day.? It is tough to justify today?s VIX on today?s equity movement.
The panic rise in the VIX is from what might happen come today.?? See here how the VIX cash spent most of it day running and then selling off, only to get running again and level off ?into the close.? A 1.6 point move in a 16.22 VIX with a .3% SPX index move is a signal for a good size move, up or down.
Livevol (r)?www.livevol.com
Note how the VIX futures jumped into heavy backwardation, really for the first time since Putin landed storm troopers in Crimea.? A curve, this backward is looking for a giant realized move and near term volatility destruction.? We have to wait for the weekend to find out what happens.? Fasten your seatbelts come Monday/Tuesday!
The Trade
Own shorter term gamma in RSX or SPY and hedge the long volatility exposure with VIX or VXX or similar product.? Give yourself a two week duration.
Keep an eye on SDEX, skew went even higher than when I noted Wednesday.
Disclosure: VXX, RSX and SPY positions