Correlations closed the week at .27 and 9th percentile, dropping off a cliff again.
This is generally indicative of lower future realized volatility…. but
IV-RV is no 0. This has acted as a floor for the majority of the past year. It would be unreasonable to expect IV to go lower.
Contango is <5th percentile but making lower highs. It is still very expensive to own long vol via etns, but likewise we think spikes are likely.
We had a liquidity signal print on Friday indicating people reshuffling positions significantly. We do not want to fade the next move.
Thanks and have a great week.