Blue Horseshoe Loves This Finance Blog

Same Song, Next Verse... On April 6th, the cryptocurrency market breached the $2 trillion mark in asset valuation for the first time.   However, on April 19th, Bitcoin traded below its 50-day simple moving average (SMA) for the first time since October and has, thus far, failed to reclaim that technical safety level.  Also, another bearish indicator is forming as it looks like the 20-day SMA will cross below the 50-day today.   As someone who graduated college in December of 1999 right into the waiting arms of the dotcom crash of 2000 and then, about 7 years later, had a front row seat to the housing crash and subsequent financial crisis, this all looks eerily familiar...  Bitcoint has had a 6x run-up within the span of a baseball season and crypto - in aggregate - is currently about 2% the size of the US equity market.   This all begs the question... 'What happens if this bubble bursts?' On the surface, it's hard to imagine a repeat of the contagion o...

 TWITTER Last Friday, Michael Khuow - a contributor to CNBC's 'Options Action' - posted a portfolio hedge trade on Twitter of a July VIX 25/40 call spread with a max profit-to-loss ratio of roughly 6.5x. https://twitter.com/OptionsAction/status/1380647907603451906?s=20   https://twitter.com/OptionsAction/status/1380647907603451906?s=20 Let me first say, Michael is a highly intelligent and accomplished professional whom I have a great deal of respect for and hold his opinions in high regard.  However, I happen to disagree with him on this one... VOLATILITY OF VOLATILITY Let's start by looking at the underlying in this trade because the VIX is unique.  Here's its roughly three month distribution (duration of our trade) for the last two years... Clearly, there's an extreme right-tail relative to its mode... this is to be expected and its this feature I believe Michael is trying to exploit as a hedging instrument. However, over this look-back period, the VIX was a...