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Calendar Conundrum with QQQ

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I am not sure conundrum is the right word.  Maybe it is more like a situation.  VIX is falling very fast at this point with the 3 day weekend coming on the back of declining volatility across the market.  Today the quick Weekend markup for IV went south in a hurry as we closed 13.79 in VIX and the 13 handle for the first time in 2016.

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Holy Contango Batman!

The VIX settled at the lowest level in months and briefly had a 13 handle today.  Does this mean that all is well and the market is full on risk on?  No,  at least for now, the market is still carrying a heavy hedge.  How can we tell,  pretty simple...take a look at the spread between April VIX futures and the VIX cash index.  It is almost 4 points wide.  That is wide enough to drive a Mack Trukc through the spread.

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What was the other side of the VRX trade?

That is an interesting question.  Take a look at this link from Bloomberg:http://www.bloombergview.com/articles/2015-11-24/bill-ackman-found-a-che....  In this they state that Bill Ackman sold puts OTM and bought calls spreads OTM.  Usually there is margin to put up with this trade but not quite as much as stock and risk does not hit hard until the underlying blows through the short put strike.  And VRX blew through the strike.

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Vol Index Relationships Normalizing

Over the last 6 months vol indexes have gone topsy turvsy.  We have seen RVX trading at discount to VIX,  VIX trading above and below VXN, and VXN trading all over the board.  Traditionally,  VXN and RVX have moved together in somewhat similar fashion, and have traded at a premium to VIX.  VXN is normally 2-3 points higher than VIX and RVX is typically 3-6 points higher than VIX.  However, those spreads were out the window.  They are not anymore:

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