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While the SPX closed well off its lows and the VIX well off its highs, I found it interesting that SPX made the much bigger move. In addition it still managed to close below the Jan 20 close (while not toughing the lows from that day). At this point I think as I look at how equities and vol are moving, VIX looks like it really wants to blow out. Maybe not to 40 like in August, but I think we are going to see an intra day high that might be near levels we saw in January, maybe much higher....certainly higher than where we are today.
LivevolX for Lightspeed
When I see a chart of vol that goes stright up, even if its a touch slow, I always remember the golden rule of option and volatility trading. Buy high and sell higher. This appears to be a chart setting up for the 'buy high' portion of that trade.
The Trade: we like owning premium and bonds, currency, long VIX futures and even some broad market names and equities. A long VXX or UVXY call spread might make sense.
Disclosure: Karman Line Capital is currently long VIX exposure.
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