Without parsing what the Fed said, they are officially starting to wind down their extraordinary measures.? Maybe Ben pulled the Congressional leaders aside and said ?Hey you idiots, I am done and there is nothing more I can do.?? I guess it worked because if we can get sane fiscal policy, things should be ok.
The VIX was in total freefall yesterday.? There was a shiver at the beginning but there is no doubt that volatility lost a significant bid.? After all the talk of VIX being up for so many straight days it is moot now.? SPY closed just pennies from the all-time high and unless there is some sort of extraneous event, we will make new highs this year.
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LivevolX (r) ?www.livevol.com
Both the volatility sell off and pace of the exit made the market happy.? The Fed is getting out and stocks cheered so there is not much else to say.? If the Fed sees diminished risk that is bullish, we know not to fight the Fed by now.
The Trade
Take the low IV and buy call spreads in the SPY/SPX since the Xmas rally is getting started. ?Hedge with super cheap VIX Jan call spreads if you feel the need. ?Close at the end of the year 2013.
Disclosure: positions in VIX, VXX, SPX, SPY