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Yesterday, we summarized the violent action in volatility as follows: "If Feb 5, 2018 was the infamous inverse VIX ETF "volmageddon", then May 7, 2019 was the "VVIXtermination" event", following the recent explosion in the vol of vol, or VVIX, and as Nomura's Charlie McElligott writes today, "the trade yesterday certainly was short delta, short VVIX, long front VIX."
Then, as McElligott elaborates this morning, the "consistent dynamic" - which we first previewed over the weekend in "Is The VIX About To Explode Higher Thanks To A Record Short Squeeze " - across the last few bouts of market turmoil have seemingly first evidenced-themselves in vol of vol—or "VVIX never lies"; As the Nomura strategist also notes, "since that initial “VVIX as ground zero” theme, we thereafter witnessed the VIX curve turmoil with systematic short vol covering, and thereafter, said issues then-showed in Delta One –type products (Risk Premia strategies, Notes etc as we begun seeing more “Yield Enhancement”- / Carry- / Momentum- strategy stop-outs on short vol positions)."
Stocks - Gamma - Territory - Sunday - S
Meanwhile, as stocks slide ever deeper into "negative gamma" territory, which we first discussed late on Sunday, the lower the S&P drops the greater the risk of a sudden repricing lower in risk.
It's not just this feedback loop of...
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