To start off this post, I want to remember an important quote that I will try to summarize from Tom at FX Evolution:
"We come from an abundance mindset. There are so many profitable trades available to us. They are all around us. Lets remember some first principles:
(1) Patience.
(2) Do not predict.
(3) React.
(4) If it is in the press, it is in the price.
Now, it's almost the end of May. We have June OpEx approaching fast. We know that the market is a future discount mechanism.
Let's look ahead, but first let's see what June is offering and what expires. We have positive gamma. We have the passive bid in the background. We have the 'summer of george' ahead as Cem has reminded us often lately. Many expect Vol compression.
June will have that positive gamma expire. After the June Quarterly OpEx, We have the July OpEx. Currently, the dealer positions are almost all negative gamma. These positions can change, so lets stay agile and not commit to any hasty decisions or bets.
The normal regime of vol up, spot down or vol down, spot up is not here. This is interesting. The summer is when most people assume that there will be vol compression over the holidays and summer.
Will this be the case? Let's dive into this topic in more details as we get closer to the June OpEx and front July.
Note: VIX expiration vs OpEx.
-When VIX expiration occurs after OpEx, the likelihood of a performance flip is 68.42%.
- When VIX expiration occurs before OpEx, the likelihood of a performance flip is 58.82%
I would like to continue this discussion over the coming weeks into July OpEx.
-L