Election shocks and surprises
The old saying “It ain’t over til it’s over” was never more
true than last Friday. A small change in
the election game set volatility on fire again.
Generally what I like to see is standout volatility up or down for a
ride in the volatility products. Usually
the vol products just decay but every once in a while there is a cause for an
out of category volatility. Even with
the market clocking in single digit realized volatility UVXY found a way to
jump off of the 3D map again.
UVXY is a levered product, but when the levered product gets
way above all else it is noteworthy. The
dark red color in the AlphaVision® Landscape below, shows the lively 60 day
realized volatility, with NUGT in the front of the group. Height is what we want since that is the 10
day realized. UVXY is back out in front in the top 10% of 1 day relative moves
which is how each decile of ETF’s is sorted.
The election will keep UVXY moving.
I expect UVXY and the volatility products to stay lively
through the election with a binary move post- election. There is now too much uncertainty to let
volatility tank prior the Nov 8th a la The Brexit. I like long vol
plays (call spreads in UVXY) in the shorter duration, but expiry after the Nov
8th, and a short vol play just farther out in the post-election run
up. The short vol can wait at least
until the 7th.
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