“This Has Only Happened Twice In History” – Goldman Asks “Should We Worry?”

Thursday, January 11, 2018
By Paul Martin

by Tyler Durden
Thu, 01/11/2018

Toward the end of the third quarter, as the VIX was plumbing new all time lows – a trend that has largely persisted ever since – we reported that in the latest striking development involving volatility derivative products, the total outstanding Vega across the entire levered and inverse VIX ETP space had reached $375 million, an all time high.

This, as Bank of America showed at the time, was the result of the highest positioning in levered long VIX ETPs since July 2016 offset by a record high exposure across short ETPs.

And while the surge in long vol ETFs vega is something that had been duly documented since 2016, the offsetting move by inverse VIX ETPs – a preferred trading instrument used by retail investors and for institutional hedging – was certainly a novel development.

Fast forward a few months to the first week of the new year, when Goldman’s new derivatives strategist Rocky Fishman, who until recently toiled at Deutsche, followed up this observation and highlights that, in an acceleration of the move we first observed last September, “the net position of VIX ETPs has become short over the past few weeks, for only the second time in their eight year history.”

The Rest…HERE

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