The S&P 500 is looking pretty resilient this morning despite the weekend's failed debt-ceiling talks and overnight downgrades. VIX futures have not reacted as much as I feel they should have.
Although I believe a deal will ultimately get done as it is in both their best interests, I feel that equities and the VIX are showing a bit of complacency. As I already have a modest short position in volatility, I will use this morning's strength to get some of the weekly ATM VXX calls.
I still like the short VXX trade at this point in time but I feel we might see some panic and selling of risky assets later on in the week if a deal has not been made yet. If such a scenario emerges, I will then look to unwind my calls or sell some spot against my calls.
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