Originally Posted by Vanity
Just happened to click the thread and saw my name! After the +10 move in SPX yesterday I exited my vol short position. I was expecting a dip today but I don't think anyone saw -20 SPX points today. Here's the kicker. Today the index lost -1.25% but cash VIX popped 19%. Not sure if you're familiar with vol but that is much too high of a jump. Usually correlated around +5-9% on the spot VIX when the index sells off 1% like this. Instead, we saw +19% which means we either go to hell tomorrow to justify this VIX pop (another -20 point day) or this vol is coming down. Here's a fact though: 10% of the VIX call volume was from ONE very large trader. This trader SOLD his long vol positions into the close today, which tells me even he realizes this was overdone today. I am short fol as of the close of the index. XIV @ $21.98. Time stamped.
Vol would agree with you. If we get a flat to up day tmr, $vix could drop 6-12%, driving down futures by a lesser amount (probably 4-8%). This would hurt the most people. We would run up again, make a second lower high and then kaboom (possibility). $vix spike might have just been a warning flare, not the actual Calvary yet.
P.s. never touch TVIX, the vehicle does not track it's NAV correctly and will piss you off trying to capitalize on VIX spikes. Go with VXX. Never touch 2x Vix etfs unless you seriously want to not be able to cover your losses when it goes down.
I agree with what you said. There is actually a 75% chance of an up day tomorrow from my back test given such a big spike in VIX with such a small down day from SP500. In terms of the intermediate, I'm still bullish. Home builders took a fat hit today a well. Consider shorting XHB if you agree.