Vega

Like most people that have had on long Vega trades during this volatility crush, got whacked. I did really well with my double diagonal, but my calendar that I still have on is looking pretty beat. I adjusted it and all the $RUT did was move higher, with volatility moving lower. Today is my line in the sand; if we get a few more points of “pressure” on my spread I will be tempted to peel it off.

The $VIX did it, it traded into the teens, and this is giving individuals the confidence to allocate more of their hard earned money into the equity market. But I think that IV and the $VIX has bottomed out for now. I think the $VIX could pop to 22 with no problem, and fall back into the teens. I read yesterday that Goldman Sachs as 6 trade ideas for 2010 and the #1 trade was short volatility. Now for most short volatility is a complicated concept, but if Goldman thinks volatility is going to get even lower long equity is going to be a great trade. Even long premium would make sense to me.

Have a happy holiday everyone