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Buy the Vol but don't buy the Vol

So as 2017 gets off to a raucous start let us compare and contrast with the start of 2017.   VIX was around 19.50 at the beginning of 2016 and quickly moved to the 30s as traders let the potential calamity of rising interest rates and possible Chinese meltdown rule the day.  We got the rate rise but China is still chugging albeit at exactly the same spot it was last year.  The only thing really different is that there is a new man in the White House come Jan 20th.  VIX is 11.85 going into the transition.

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Why is the VIX rising?

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Stocks have lost their way lately and can't really make a move anywhere.  Mostly that has got VIX moving with VIX cash moving to the mid-13's.  Yes you heard that we rallied hard to the mid 13s.  VIX Jan futures are getting close to 15.  This in a market where 60 day realized vol is still in the single digits.  VIX is pricing something that will happen next week.  Maybe around a surprise in rates to go along with the higher volatility in the rate complex.

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Does the option market want an End of Year rally?

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I guess at the end of the year stocks have finally run out of steam.  After opening at higher levels and ralling hard on Tuesday after Christmas buyers finally got tired after shopping.  The strange thing is that the upside skew in the SPX for the end of the year is tilting bullish.  Take a look at the skew:

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