If this was the end of the sell off, ?Option Markets were not buying into it. ?The VIX spent the entire day yesterday underperforming the S&P; ?on a day where the S&P is up 1.1-1.3% ?I would have expected VIX to be down at least 2 points. ?To make matters even worse, ?what little performance there was in VIX on the day completely evaporated in the final 15 minutes as the VIX completely popped.
Livevol X (r)?www.livevol.com
When the S&Ps are up 20 and the VIX runs up that is not a good thing for the near term health of the market. ?A move like that points toward today being a one off event. ?One interesting thing that happened is that the VVIX got completely smashed today. ?This points toward traders wanting gamma, but not vega.
The Trade:
With traders not wanting vega but wanting gamma, a short time spread likely makes some sense (if one believes what the market is saying).