‘The Biggest Risk Is A Quick SPX Selloff At The End Of The Day’: It’s Time For A ‘Doom Loop’ Update

‘The Biggest Risk Is A Quick SPX Selloff At The End Of The Day’: It’s Time For A ‘Doom Loop’ Update

Ok, so it's time to talk about VIX ETPs and the "doom loop" again. Hopefully you don’t need a refresher on this, because if you do it likely means you haven’t been paying much attention to how shifts in market structure are creating systemic risks that no one understands, but just in case, the idea is that thanks to the low starting point on the VIX, a nominally small spike could force inverse and levered VIX ETPs to panic buy VIX futs into said spike, thus exacerbating the situation and ul
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6 thoughts on “‘The Biggest Risk Is A Quick SPX Selloff At The End Of The Day’: It’s Time For A ‘Doom Loop’ Update

  1. “Sustained lower volatility enables traders and hedge funds to take more leverage for the same value-at-risk (VAR) score,” Utoslahti wrote, adding that “the longer markets stay calm, the more vulnerable they become to a sudden shock causing an outsized deleveraging event.” Precisely.

  2. The ViX went up in the last hour as the markets hits all time highs. This is very uncommon, something is about to happen and I think the VIX will soar sooner than later, that could only mean one thing, a market correction of 5% or more is finally going to occur!!

  3. ‘quantitative exuberance’ that poses risk when monetary policies start normalizing in a meaningful way next year.
    i assume you think the market pulls back in 2019. correct?
    would that be in the first 1/2 or the second?
    just curious.
    sb

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