The market took another look over the edge yesterday and decided to walk back from the brink.? Whatever the uncertainty of the Taper brings the reality that the Fed is peeling back because the economy is getting better.? And as President Clinton, said ?It is the economy, stupid.?? Recall the early in the week the bid for the downside was perking up.? This was the snap on Monday
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At this point we posited in our blog on Monday the small bid in skew should lead to higher volatility.? With VIX ringing in over 16% yesterday it certainly did.? If you subscribed to our Strategy Letter we set up the idea which we mostly closed yesterday.? The other end of the curve is starting to move.
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Note the bid in the upside skew now as the market came off of? its bottom.? Much like after the Shutdown the market finds its legs.? I think the result will be similar but the next few days until Wednesday at 2pm EDT will be rocky.
The Trade
The upside broken wing butterflies for even or better should work well.? Place the long strike at the near term highs.
Disclosure:? multiple positions in SPX, SPY, VIX and its equivalents