Variance Swap and Vol Levels continue to spiral downward - however Asia and Europe variance spreads still high.

Variance Swap and Vol Levels continue to spiral downward - however Asia and Europe variance spreads still high.

With global volatility levels collapsing as was indicated by our thesis based trades on the de-levering consumer, Euro Zone issues fading and US Earnings/Economics dominating the spotlight, finding volatility edge has become increasingly difficult.

PFG needs one more box to be checked and that is “need” for vol or supply/demand of vol seems to fairly distributed in the market.  When this is out tilt, we can then look at putting on another vol trade.  

Our last trade took advantage of these dis-allocations in the market and performed +50%, this however was a trade, rather then a investment in a vol thesis.


1. Vol Levels continue to collapse



2. Largest daily vol drop seen this year - correlating well to our market rally call

3. Risks in Asia and Europe still not out of the woods.


We continue to wait patiently for another vol based trade, however PFG is exploring a short vol, short delta trade in the meantime.  These trades are especially difficult even if the edge is clear, getting the correct delta can prove to very hard no matter how much back testing one has done.  The primary thesis for this trade is that money continues to be placed into market in a rather less violent way so we can get a grind down situation as strong hands are probably unloading stocks on the weaker players who missed the rally.