From the latest Weekend Notes by One River Asset Management CIO, Eric Peters:
“After the February spike in vol, it was hard to hold onto gamma,” said Roadrunner, the market’s biggest S&P volatility trader. “If you were making markets, you got taken out of every position.”
The VIX spiked to 50 on Feb 6th and was back below 15 on Mar 9th.
“But in the past few weeks, it’s been easy to buy options and easier to hold onto them.” The VIX traded 26 on Mar 23rd and has been declining ever since. “When options get easy to buy, vol heads lower. That’s how this game works. That’s why vol has gotten slammed for the past few weeks.”
“Interest rate vol keeps coming in,” continued Roadrunner. “It’s hard for all vols to really move unless interest rate vol really starts rising.” He looked across his floor, an army of traders making markets.
“I see rotation, tech is rolling, commodities are rising, all late-cycle movements. I could see us attempting new highs in the S&P this summer, but on narrow leadership, low volume.” Those are the signs.
“But I’ll be surprised if we break out to the upside. This whole setup feels like we try and fail, then roll into a real bear market.”
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