Maybe it was the Europeans or maybe it was some jitters in China or Africa.? The FOMC suddenly lost it zeal for raising rates.? The economy here has been growing but not enough to satisfy our rate mandarins.? Maybe it is the TWTR/FB world of instant gratification but it takes time to get off the QE band wagon.? The Europeans are? in the tougher boat of restructuring economies since they cannot borrow at the rate they used to so they can pay all the benefits.? It does not look like Super Mario is going to finance that.? Better to have slow or even growth from restructuring than souped up QE.
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That is where the Fed finds itself.? There is not a lot of room to raise rates yet until Europe stats to grow on its own.? Why the big rally today?? It feels like 2012 and 2013 when everything hinged on Fed help.? The Fed seem to be giving the Europeans that little boost.
Any VIX trouncing like this is a reduction in risk assessment and a reduction in future realized vol.? Traders got their QE rally today and anything after this will be slow going.?
The Trade
Broken wing upside butterflies look ?good for small credits, two weeks out.? Pick the SPX.? This might be a relief rally but there is scant reason for upside moves like this for the next two weeks until earnings really kick in.? I think ATM butterflies in the SPX might not be bad either of 1+ week duration.? The idea is to collect the next down tick in VIX which is most likely from 15.55 to 14.
Disclosure: VIX, VXX positions