The market did not moving a whole lot yesterday in anticipation of what the FOMC is going to decide on bond purchases.? I don?t know for sure, but something between a small Taper and no Taper.? With the House and Senate coming up with a medium term spending solution they can squabble in relative peace trying to accomplish something.? The FOMC has surprised us for a bit and the Rope-a-Dope tactic seems to keep the equity markets pretty buoyant.
LivevolX (r) ?www.livevol.com
You cannot hide from demand and one of the most active volatility ETP?s, the VXX, is showing big swings in price and volatility.? Note that VXX sold off from yesterday’s highs before any news was announced.? What did not sell off was the implied volatility of the options.? With no news out the VXX juice remains bid.
VXX is due for a 10% move at least this week.? While I think it will be lower you can create a just in case trade.? By 2:30 pm EDT today we will know which way the wind is blowing.
The Trade
Buy longer term OTM VXX puts and very short duration OTM calls to create a funky backspread.? If the market tanks sell the calls and keep the puts for the eventual march back up.
Disclosure: positions in VIX, VXX, SPX, SPY