One of the things talking heads are constantly pointing to is the low VIX. It is 'complacency' they say, because that is a buzz word. The fact of the matter is the VIX is not cheap; the VIX is trading at a HUGE premium to current market volatility. Take a look at this spread:
Livevol (R) www.livevol.com
I think this points toward a market that is much more hedged than traders think and that the VIX is going to have a hard time breaking 18 with this kind of spread. HV looks like it's getting wound up and could pop at anytime. When we move, it will probably be a big one. However, the VIX itself might not react because of the premium it is currently trading.
We continue to like calendars and butterflies in SPX. Our VIX fly has expanded to 1.20, and we are looking to unwind the spread. We also like buying VXX puts, because when IV does come in (and I think its going to once we get a deal), it will come in fast.
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