Are US equities going to experience a major selloff in the next couple months

Jay Soloff

Argonath Financial

Are US equities going to experience a major selloff in the next couple months? Based on a huge trade in the VIX, the benchmark volatility index, some people think it could be the case. A larger trader bought 150,000 May 22/30 call spreads on the VIX for $0.53. That's about $8 million dropped on the trade that would need the underlying to spike by roughly 50% (from 15) before it even reaches breakeven. On the other hand, if the VIX closes at or above 30 on May expiration, the trade would pay off a whopping $112 million. However, I don't necessarily believe this a speculative trade. Recent data suggest VIX options provide a cheaper hedge relative to the highly popular S&P 500 options (SPX). This is most likely a tail-risk hedge against a large long equity portfolio.

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Jay Soloff
Jay Soloff
Research Analyst
Argonath Financial

I'm an investments analyst for a US-based independent investment research firm. My focus is on economics, options, and all types of stocks, but especially tech, Internet, and renewable energy companies. I have experience as a options market...


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