Tuesday, July 25, 2017

No Way Out Of Trump Casino

ZH: If Volatility Spikes, What Happens?
"Investors have been crying wolf about the VIX complex for years, and have been wrong so far..."

"When volatility is low it tends to move a lot for a given change in the S&P 500"

"a 1-day percentage change is a big deal in the VIX complex because the levered and inverse VIX ETFs and ETNs rebalance daily based on the percentage change, and some of the thresholds for forced unwinds are based on the percentage change.  This is why lower vol creates higher risk."

The biggest S&P 500 selloff when VIX was less than 12 was 3.5% (Feb 2007):

In other words, a major gap down in the S&P from these levels and it's game over.

"An overnight gap higher [in VIX] that doesn’t give investors the opportunity to hedge is the worst case"

Fortunately, there's not a lot of risk right now from Forrest Trump, the Fed, GDP #s, USDJPY carry trade, EM Currencies, Tech earnings...


This is all going to come down to the dollar and fake-believe reflation...