They crushed the VIX, right?

Well, like the Greek referendum in 2012, they came, they voted and stocks rallied.  I am talking about the Crimean’s who don’t seem to want anything to do with the rest of Ukraine.  How it all shakes out is a bit of a mystery, but some very select Ukrainians and Russians will not be able to go to their ATM machines anymore when they fly to London or New York.  That message hit loud and clear as both Russian and US stocks rallied back a bit today.

At the money volatility got hit in all the big indexes as you can see from the Livevol Term Structure slice below.

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The curious thing is that the skew did not really participate in the meltdown.  Note the nifty SDEX index was actually up a tad on the day.

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I think juice buyers are getting smarter with these political events.  They are essentially backspreading a long equity position and…waiting. The rallies have been so severe after the news over the last two years that the long gamma would pay better than just buying the puts.  This keeps the skew elevated for a little longer since the premium buyers have no interest in closing.  The juice buyers are  waiting and are content to let the upside happen.

The Trade

Iron Condors, to a flat delta or broken wing butterfly pairs (calls and puts), are the best way to work away from the ATM and sell the pricy skew.  I am not a seller of ATM gamma, as Putin might still decide to shoot somebody.  Disclosure: SPY, VXX positions       Andrew