Within the first hour of trading, the VIX is up 10%, the August and September futures are up between 4 and 5% and the S&P is down over 1.3%. I believe today's sharp spike is due to the complacency I observed on Monday and Tuesday (more so Monday as volatility futures had begun a sizable move yesterday). Such complacency is often followed by panic and this often causes the market to overreact.
I would normally be tempted to sell more VXX. However, given that such a move has occurred on Wednesday, I fear that if no deal is done, we'd see similar moves over the next two days. Thus, there may still be some upside in VXX and definitely a lot of downside in the S&P (as the rise in VXX has by far outpaced the decline in S&P).
With the way things are playing out, I believe it will take them at least the weekend to come to an agreement.
Although I've sold some VXX against my calls as VXX rose this morning and throughout yesterday, I still have half the calls with no offsetting position and am carrying quite a bit of positive delta. Now comes the hard bit - what should I do now?
I would normally be tempted to sell more VXX. However, given that such a move has occurred on Wednesday, I fear that if no deal is done, we'd see similar moves over the next two days. Thus, there may still be some upside in VXX and definitely a lot of downside in the S&P (as the rise in VXX has by far outpaced the decline in S&P).
With the way things are playing out, I believe it will take them at least the weekend to come to an agreement.
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