Friday, May 31, 2019

PredictIt/ politics short VIX trades follow up

We do have some actual equity/bond movement this month so in addition to the long duration short VIX + ~1mo duration short puts on VIX and long TLT, I did want to give a PredictIt macro update-

The 1st recap and most important- the Trump 2019 impeachment market- 
The Barr/Mueller statements appear to have added a good amount of volatility to this market, ultimately what we want as short VIX traders- to fade it.  As of writing this and within the last week the Trump "no" impeachment trade went from ~80c to ~70c which is quite a move, but seems to be holding at the ~70c area as a 'support' in a technical sense. 
 Again I genuinely feel this was mispriced back at 80c, and have been able to average down to about ~74c.  I do foresee it holding in this range and not 'vol crushing' immediately as the Dem/left platform is pretty locked in on 'impeachment' as a talking point. (note it repeated at every town hall event and twitter post after the Mueller conference- by every main Dem except Pelosi/Schumer)  This has the echo effect of now not repeating the impeachment line/ position is not a Dem option given that so many are already on that side.  (if you recall the black lives matter vs all lives matter part of the 2016 Dem primary debates)
Ultimately this cooks in a higher permanent risk premium for the rest of the year, as I posted earlier on twitter showing keeping the pricing flat for a month pops the annualized ROC by a couple percent.  So overall, an even better entry now, and a 'grin and bear it' hold if you are in.

2.- The other 'short VIX' Justice dept markets-
The rest of the 'indictment, charges, etc by 2019' markets are acting much closer to the short VIX time decay model I mentioned last month, the main ones being:
-Hillary 
-Huma
-Don Jr
-Kushner

All slowly creeping up from the 84->88 range on average.

The higher risk tranche would be:
-Comey
-McCabe
-Brennan (coming soon according to PredictIt twitter)

Again I would strategically want to max that first group before Comey and friends, in the same way you want govt/investment grade before junk bonds, assuming all are mispriced and you don't strictly need to reach for yield.

Send me your thoughts on twitter!

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