This week’s episode looks at the volatility market waking up as the front of the VIX futures curve inverted, along with how healthy market mechanics kept vols in check for most of the week before Friday’s selling. A lot changed in the final session of the week, so I spent much of the time dissecting what actually happened, why, and what it means going into next week.
Topics covered:
- HRV and EWS models: both flashing cautionary signals, with HRV the one I’m tracking into next week
- VIX futures term structure: the front of the curve inverts, and the expiration cycle makes for a tough trade
- Overvixing, a rich variance risk premium, and a late-day VIX/VVIX divergence: signs of a market overreaction
- Volatility composition: single-stock vol driving the move while correlations stay low
- Market mechanics: the Dow and rotating mega-cap support keeping vols calm all week, until Friday
- Treasuries and credit: rates pressure easing, and a split between high yield and investment grade
Here we go!
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