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Today's contraction -- sell -- just a precursor for more pain ahead.
One strategist who was got that right all year think so he's predicting.
A pretty significant 8% 8% for a hot in the markets and says there's one key sign out there that's telling him.
That that will come to pass he's -- instructor -- -- partners' equity derivatives strategist rate to happen this year.
And and look at you're -- you said volatility is gonna go down it did now you are protecting that it will go up pretty significantly.
Where we going what have you seen that gives you that indication.
Well couple factors to think about first -- implied volatility.
Or -- always stays low for certain period of time back in June.
-- declined back down below twenty.
At the time we thought that would last about four months based on the magnitude of that volatility event that gets us to right about now.
The other piece you have to consider is that the seasonal peak in volatility for the year is this week.
So our view was four months would converge.
With that seasonal peak we're sitting on that now.
And that's really driven our expectation what you say volatility would move higher.
You say that that this week traditionally.
It's a problem well here we are we were up about 12% today for the volatility DX 13% hitting about eighteen but the annual -- -- Now.
If we go to what level would we then see an 8% drop in the S&P which is what you're protecting.
-- -- percent would correlate with about a thirty reading index since -- -- 2007 that's happened eight times.
Twice -- had -- -- up to mid forties that correlates with about 16% correction so let alone -- cavalierly.
If we hit a -- of about 4030.
Here it would take you to thirteen forty on the S&P 508%.
But if the -- -- -- climb even higher and go above its 52 week high to about forty but that's not the sort of flash crash 548 -- 49.
That we would see.
A much more considerate to considerable drop on the exactly -- -- correlation there two S&P 500 around 12100 okay.
Our viewers -- listening saying let's say he's right.
Look in the camera tell them how -- they make money -- how -- -- profit on this what do they -- -- reality is implied volatility is still pretty low so the simplest structuring put on is to go around buy some puts and feel confident when you look at the spiders -- WM.
You know it's still very Smart trade mixed closed eighteen change today we're talking about -- a potentially it seeing thirty.
And you know that's a very simple straightforward.
Trade you can but on confidently.
The other trade to think about is being long some volatility their products out there.
Have beaten being beaten up -- -- because you can't buy these and hold these but if ever for example you -- going to look at VXX.
This would be the time because.
Volatility has convexity to it meaning essentially it moves vertically win the type of event that we're talking about happens.
And you can own calls in VXX and move out further December or January there.
So this will move higher because year to date and one year it's one -- off the highs exactly so you say that we will start to see reversal here a shift to the upside.
-- short stocks.
That was certainly could -- mean we're really more focused on the risk management piece which is obviously hedging.
And long volatility exposure.
You know in this area we're talking about you'll make money shorting stock and you say utilities Staples of -- On a relative basis utilities Staples Telecom services traditional defensive sectors will outperform again on a relative basis on an absolute basis.
All sectors could get beaten up in -- -- -- -- You guys heard it from Jim -- and he's been right MK have partners' equity derivatives strategist at the XX is what he says he might have an opportunity with thank you so much -- --
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