Below is a brief excerpt transcribed from today's edition of The Macro Show hosted by CEO Keith McCullough.
Volatility. We’re right at the spot. That spot of FOMO.
How do you know? You look for FOMO with two signs.
- When the VIX is at the low end of the @Hedgeye Risk Range and
- When implied volatility discounts are at the lows.
And well, just look at this data!
The low end of the VIX Risk Range is at 14.73 and implied volatility is at a discount to realized volatility of -45%. In other words, on both counts...
Now, I haven’t shorted SPY’s yet but I’m looking forward to as we get a little further toward the top end of the range. I know what you're thinking...
“But... but Keith? What if the SPY range keeps going higher?”
Guess what. That’s what happens when volatility goes lower. This isn’t your Old Wall resistance levels. As the data changes, our target range changes.
Looking at what I like on the long side of equities...
Low Beta, Minimum Vol (and preferably Large Cap with Low Debt) is where I’d be allocating capital this week. That’s not new.
But be careful on the long side in general. With implied volatility discounts as far as the eye can see, there is plenty of complacency out there and with that comes an opportunity to buy puts.