Thursday, July 20, 2017


"No Way Out" is a movie about a KGB mole named "Yuri" who gets tasked with investigating his own crimes, which he doesn't do a very good job of, because instead he's trying to figure a way out before everyone realizes he's the plant. Silly...

Speaking of no way out:

ZH: VIX 20 Is Now The Wipeout Scenario

The VIX just traded at the lowest level since 1993, and according to the linked article, the average since 1993 is exactly 20. So, the VIX is currently at the rock bottom end of the range and a return to mid-point of the range is now a wipeout market scenario.

In other words, returning to a level of volatility seen four times in the past two years (blue line) is no longer an option:

What the article doesn't mention is that speculators are a fly on an elephant's ass. They're always finding some way to blow themselves up. The real issue is the amount of large scale unhedged capital now at risk as hedged funds morphed into mutual funds over an eight year period. And as a tsunami of capital migrated to passive ETFs.

This is how Wall Street used to hedge:

Herein lies the problem, because spot volatility is already rising relative to expected volatility, even though absolute vol remains rock bottom:

Meanwhile, second derivative volatility relative to spot volatility has been uptrending for eight years, which means that there is extreme sensitivity built in to the volatility complex.

The absence of volume is not going to benefit gamblers trapped in the casino

EM Currencies were bid today: