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More testimony leads to another flat day for the market.? After the rally of the last 3 days a rest was needed.? What is the strangest thing is the volatility crept into the market and just as fast is leaving the market.? VIX cash was down .20 today and all the volatility products pretty much followed suit.

Take the VXX for example as our favorite product that is reliable crappy.? I heard a statistic that most of the volume holds the product for two or three days.? That is the right amount. ?Volatility of the options in there is usually the biggest tell and right now they are on a one way trip to the basement.

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Note how the IV of VXX is getting into the 50s on the 30 day IV.? The more certain the direction in this product, the IV tends to lead.? Right now both are heading south and I would not stand in the way.? If the IV keeps dropping tomorrow, that means the bid for the upside is starting to dry up.

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Note that the only IV up on the day is the short term ATM gamma.? Buyers are buying puts now not calls and it would not surprise me if VXX headed below 40 sometime next week.? There is no real all clear sign from the shortest emerging markets crisis in history, but the new Fed chairwoman is not letting it bother her.? Yellen is off to a fast start.

The Trade

Long puts in VXX of 1 month duration somewhat ATM and close when VXX hits 40.?