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volatility

Epic VIX Short Hits New Record, But Is There Trouble Ahead?

"Ok, well it's time for another edition of 'interpret that record short VIX positioning.'"

Ok, well it’s time for another edition of “interpret that record short VIX positioning.”

The latest CFTC data (out as usual on Friday and current through Tuesday) shows the spec net short in VIX futs rose by something like 16% w/w and is now at a new record:

VIXShorts

You can make of that what you will, but it certainly seems to suggest that this situation is getting more precarious quite literally by the week.

Of course you have to contrast that with what we’ve seen recently in options where open interest on VIX calls has been climbing and where the call/put open-interest ratio is near its highest since 2014:

VIXOptions

So there are some conflicting signals for you to ponder (think: hedging).

Oh, and if seasonality is your thing, you’ll note that a five-period cycle look seems to suggest that the VIX will rise in the months ahead:

VIX

Talk amongst yourselves…

 

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3 comments on “Epic VIX Short Hits New Record, But Is There Trouble Ahead?

  1. Love your stuff, Walt. It amazes me that in spite of historic seasonality clearly high in late August-October, shorts have piled on even more. I also looked at the CBOE SKEW index, which hit 142 a couple days ago. I went into some detail on SA:

    https://seekingalpha.com/article/4093776-different-look-volatility-look-skew

  2. ShockedToFindGambling

    Buying VIX (VXX) calls is a one way ticket to Palookaville, unless you time it just right. It seems to me that VXX has a bias to go down in price, even if VIX stays constant.

    What’s the solution?

  3. Curt A Tyner

    Well H like so many completely fu*ked up things that are upside down when they should be right side up and vice/versa eventually the broken clock effect come into play.

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