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Volatility Lambada
Volatility is playing a little game called “How Low Can You Go.” Given the serious top down risks embedded in this market – Europe, China, small investor capital flight, U.S. housing double dip — the level of complacency here is remarkable. Then again, perhaps it’s just more affirmation that Benjamin Disraeli was right: “What we learn from history is that we do not learn from history.”
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the vxx is structurally flawed and it's getting hit by the VIX futures contango as well as the collapse in oct vix futures.
Indeed flawed, but still functional enough to more or less reflect the message. $VIX recently hit pre-flash crash lows as well (though you are correct to note there is a disparity).
Keep an eye on VXZ and VXV to see how option premiums are bid further out in time– they haven't been hit as hard b/c everyone expects this big move into October, similar to the big move everyone was expecting into September
Good call — thanks!