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We just got off the phone with "our VIX guy". He has not called us lately as he had "no great big ideas", so here is his latest logic (frequent readers of TME know the VIX guy continues holding a 100% hit ratio, the inverse way, when it comes to VIX);

His base case according to himself has changed dramatically. The recent Trump momentum, the second/third wave virus explosion, the new lockdowns etc are according to him all new information and together with the elections coming up he sees VIX going much higher (even sent us a VIX chart with some wedge break out).

What makes his input interesting is that it reminds us a lot about the current aggregate psychology. People were busy betting on lower VIX (big put buying in VIX lately) way too early. The above points are nothing really new occurring. Second wave has been known for months, new lockdowns have been in the pipe for long, Trump making a come back as well as the elections taking place...

As usual people hedge at wrong times and wrong levels and most tend to confuse direction with pace. Sure, there is a lot of uncertainty ahead, but how much are people paying for that premium?

People are currently paying around 36% implied vol for DAX November atm options, basically pricing 2.3% daily moves for the coming month as of writing.

Hedge premiums have exploded higher over past sessions, but do you buy insurance before your house started burning or after?

Following are a few charts in separate posts worth considering. For the ones been waiting to sell elections fear, these levels are much more attractive than what so many investment banks were recommending only a week ago...