1. Registering for the Forum

    We require a human profile pic upon registration on this forum.

    After registration is submitted, you will receive a confirmation email, which should contain a link to confirm your intent to register for the forum. At this point, you will not yet be registered on the forum.

    Our Support staff will manually approve your account within 24 hours, and you will get a notification. This is to prevent the many spam account signups which we receive on a daily basis.

    If you have any problems completing this registration, please email support@jackkruse.com and we will assist you.


Discussion in 'The Kruse Longevity Center' started by Jack Kruse, Feb 25, 2021.

Thread Status:
Not open for further replies.
  1. Jack Kruse

    Jack Kruse Administrator



    If you still think currency is not going to be devalued you just are not paying attention to what your government is really up to in 2021!!!!

    Roughly 30% of ALL of the debt accumulated by the United States of America since 1776 was incurred in the last 12 months. This is NOT sustainable.
    DebraGM and JanSz like this.
  2. Jack Kruse

    Jack Kruse Administrator

    In a normal market environment, P/E declines bigtime when 10 year yield rises. Over the last 60 years, there were only three occasions when we had rising P/E with rising 10y yields at the peak of a 12year bull market. In 1987, before the Black Monday, in 2000 Dot com crash, and today.

    The price action on the Vix is very suggestive something nasty is coming to the market. Caveat emptor.
    JanSz likes this.
  3. Jack Kruse

    Jack Kruse Administrator

    VVIX vs VIX vs S&P 500 The VVIX is a measure of the change of volatility in the VIX, and is calculated from VIX options. A high VVIX suggests VIX might be more volatile in the future, which means that SPX might also be. The gap has closed slightly today, but it's still wide.
    Johan Lindstrøm likes this.
  4. Jack Kruse

    Jack Kruse Administrator

    The VIX curve is very steep, a lot of demand for hedging in coming months when base effects could drive inflation higher . The second VIX future contract is about six points higher than the spot VIX, which is high by historical standards.

    My tarot reading..........2021 is going to get nasty for the S&P 500 soon.
    JanSz likes this.
  5. Jack Kruse

    Jack Kruse Administrator

    Today copper moved higher than gold. This makes no sense unless you see what is coming.

    How does contango influence the value of the $VIX futures? First, it is important to understand that each $VIX future is just one point on the $VIX futures term structure and that the whole curve represents how investors price volatility, not any single point.

    The $VIX term structure tells you how much investors are willing to pay for a $VIX future as a function of time to expiration (the date when the $VIX future is settled based on the $VIX spot). Say a day passes and investors' expectations about volatility have not changed.
    Does that mean that $VIX futures will not change in value? No, they will not change only in the singular case when the term structure is flat.
    If the term structure is upward sloping (in contango), that means that investors are willing to pay more for $VIX futures that are farther away from expiration.
    But when a day has passed, each $VIX future is one day closer to expiration so investors would be willing to pay LESS for that future today relative to yesterday. Colloquially, the $VIX futures are "sliding down the curve". This is not a process that happens once a day.
    It happens continuously, every minute that passes, the futures slide by a small amount. Of course, this only applies when investors' expectations have not changed about volatility (roughly meaning that the $VIX spot has not changed).
    The effect of contango on each future each day is usually much smaller than swings in the $VIX spot. But when large contango persists for a long time, these small daily changes add up.
    While volatility expectations go up and down, contango works in one direction only: It drags each future down. $VXX and $UVXY hold the two nearest $VIX futures which suffer the same fate.
    These instruments rebalance their holdings each day, but the rebalancing has no effect on the value. What does, is that they hold the same mix of $VIX futures for a 24-hour period during which the futures are continuously sliding down the curve.
    Since most of the time the two front months are in contango, $VXX and $UVXY accumulate contango losses. To make money going long in these instruments, you need to time the market accurately.

    • Contango is a situation where the futures price of a commodity is higher than the spot price.
    • In all futures market scenarios, the futures prices will usually converge toward the spot prices as the contracts approach expiration.
    • Advanced traders can use arbitrage and other strategies to profit from contango.
    • Contango tends to cause losses for investors in commodity ETFs that use futures contracts, but these losses can be avoided by buying ETFs that hold actual commodities.
    GavinH, John Schumacher and JanSz like this.
  6. Jack Kruse

    Jack Kruse Administrator

    Twitter just announced a $1.25 billion convertible note offering. Given the recent treasury strategy of Microstrategy, could
    be planning to put bitcoin on Twitter's balance sheet? Time will tell, but there are few people who understand the power of bitcoin like Jack.
    JanSz likes this.
Thread Status:
Not open for further replies.

Share This Page