Contrarian Value Ideas

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Contrarian play idea - go long the VIX, especially if it gets closer to 10, or under 10, which has been the low in the past. VIX was briefly under 10 in late 2006, and fell to ~ 8 in late 2017, and currently it's in the 12-13 area, down from 37 in December.

These hedge funds who are shorting the VIX will have to cover once volatility returns, as it always does -


>>> Hedge Funds Are Shorting the VIX at a Rate Never Seen Before

By Sarah Ponczek

April 26, 2019


https://www.bloomberg.com/news/articles/2019-04-26/hedge-funds-are-shorting-the-vix-at-a-rate-never-seen-before?srnd=premium


CFTC data showed record net position betting on market calm
Sign of complacency? Strategists advise investors not to worry

As equities surge to all-time highs, volatility has all but vanished. Hedge funds are betting the calm will last, shorting the Cboe Volatility Index, or VIX, at rates not seen in at least 15 years.

Large speculators, mostly hedge funds, were net short about 178,000 VIX futures contracts on April 23, the largest such position on record, weekly CFTC data that dates back to 2004 show. Commonly known as the stock market fear gauge, aggressive bets against the VIX are, depending on your worldview, evidence of either confidence or complacency.

Investors Net Short the VIX

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Strategists lately have been pushing back on the idea that a lot of useful information is visible in VIX positioning data. CFTC data doesn’t take into account positioning seen in exchange-traded-products -- which is notably long volatility -- or the type of traders who hold a mix of both long and shorts as a hedge or relative value strategy.

The VIX rose this week, but still remains below 13 -- more than 30 percent below the gauge’s average over the last 20 years. While the VIX inched higher, so too did stocks, the S&P 500 rising to a new record.

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