I believe it’s fair to say that the global derivatives markets we trade in today are still very much in their infancy. There will never be another crash like 2008-2009. I have no problem saying with certainty that the next black swan type event won’t be similar to any other that has happened before. Investment banks, central banks, hedge funds,…[Read more]

Good point, but they’ll at least be telling us projections & guidance now that take the new tax policies into account. That wasn’t the case last earnings cycle

Interesting phrasing there Seth calling the current SKEW level an “issue” do you see a low SKEW level as being bad for someone who is short vol leveraged ETFs because you are taking that SKEW level to mean there is less premium out there for us to profit off?

Seth, along the lines of looking at SPX options order flow, have you been keeping tabs on the movement in the CBOE SKEW index recently? It seems to be finding lows it hasn’t seen since Q4 2016 as of late

Also with regards to it ignoring the S&P500 price action as of late, that is well within the nature of volatility. Russel Rhoads had a recent blog post about times when we have seen VIX and SPX advance higher together throughout history. Unfortunately, no strong predictive correlations were to be found and we have to remember that in fact over…[Read more]

Thanks for pointing me to VIX Central, haven’t spent nearly enough time with these historical charts. But right off the bat I find myself wondering what kind of influence vol leveraged ETPs might have had on the futures curves if the robust markets we see today in products like VXX UVXY and VXZ had been trading at the time?

And in regards to UVXY…[Read more]

To clarify, I should acknowledge that the liquidity confidence crisis I’m theorizing about here is a bigger event than a “broken options chain” and could have worldwide consequences.

Follow me on this deep into the weeds scenario here: Let’s say I’m short naked calls or common shares of VXX. On the event day, VIX moves up an unprecedented…[Read more]

I have no doubt that enough volume will be there in VIX m1 & m2 futures on the day that XIV goes into “Event Acceleration” to allow them to cover, on December 1st 2017 for example, m1 & m2 contracts traded at volumes around 1.5x open interest. But yes your point about market depth at the time of the event is where things get hairy.

The move up…[Read more]

Mortgage backed securities were initially lauded as a great tool of diversification, just like bets on market volatility. We all saw what happened there when overconcentration combined with big bank opacity and a lack of regulation.

Remember the scene with Selena Gomez playing blackjack in The Big Short? See any similarities with what’s going on…[Read more]

Seth, yes, awareness is huge. For example, we are aware every single trading day where UVXY is positioned. However, because of the opacity of the ETN as dictated in its prospectus, we are never truly aware of exactly how VXX is positioned.

What would the fallout look like in the enourmous market of calls and puts on VXX if Barclays were to…[Read more]