Oil Volatility

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We may have reached peak oil volatility yesterday!

The June oil contract traded down about 50% in a day.  It was an algo driven bloodbath that pushed Oil lower and lower and lower.

Finally, the CME stepped in and restricted who could sell Oil.  It needed to happen because Oil probably deserves to be lower, but not the way it traded yesterday.  But much of the damage is done. 

OVX, the VIX of USO, traded over 500 closing 325 and OIV, VIX of WTI, over 1000 (and you thought 85 VIX was high).

When we say that Vol can go higher than you can imagine, this is what we mean.  NEVER underestimate the volatility of a broken market.

We think there is a spillover that needs to be figured out.  I would be wary of equities for the rest of the week, although I still like VIX NOT to break much above 50, if it breaks much higher at all.

We continue to like short vol short market.

VIX Traffic light is Yellow

Your Only Option,

Mark

PS – Crazy markets, in times of uncertainty, create crazy opportunities. People who stick with “buy and hope” are getting slaughtered. Even big sovereign wealth funds with all their modeling are getting into real trouble. This is why I trade volatility because it never matters the instrument or the “model.” Join me…

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