VIX ROLLING OVER

18 December 2010 by Surly Trader 0 Comments

By Surly Trader

It is pretty easy to say that on a quiet trading day a week before Christmas (S&P flat at a +.08%), the big news was the 10% decline in the VIX without any relevant news. ?Maybe the VIX thought the passage of the tax extension was?phenomenally?good for lower volatility going forward, but I highly doubt it. ?I received some interesting speculation from some investment banks, but nothing noteworthy. ?One thought it was a lack of gamma hedging after option expiration and another thought that implied was finally compressing towards realized. ?I highly doubt either of them. ?If I remember correctly, I asked the same questions back in April and then the VIX quickly shot up to 40%. ?Amnesia is a common market and investment bank trait.

Why collapse today?

Because the VIX and the front part of the VIX futures curve have fallen off, the VIX futures curve has a record steepness to it:

Nearly 10 vol points between the VIX and the furthest future?!

There are a few ways (and many iterations) to play this vol market in anticipation of a future spike in vol:

1. Buy the short end of the VIX futures curve or the ETF VXX
2. Buy the front part of the futures curve and sell the back half (buy Jan and sell a few Jun or Jul 2011)
3. Buy puts/calls one month out at low implied volatility, delta hedge if needed

Maybe volatility is really coming down to “normal” levels, but I really get suspicious when reversion to the mean happens a bit too quickly for my comfort.

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OSCAR: Red Carpets Rolling Out For Contenders In Ultra-Crowded Season

The pace of the 2010 awards season seems at this early November juncture to be faster than any I can remember. (I feel like the title of the late and great?Jill Clayburgh’s star turn,?I’m Dancing As Fast As I Can.) Hopefuls are getting out there earlier, and more forcefully, in order to gain a foothold in the race any way they can.?Examples from just two days' worth of campaigning: Michelle Williams called me from the London set of My Week With Marilyn.?Yes, she’s playing the iconic Monroe but couldn’t yet articulate what that means to her and instead wanted to talk about her?awards contender, Blue Valentine. So we did?before I had to run off to the Four Seasons Hotel to chat with Robert Duvall about his contender, Get Low. It was?a summer release he's now trying to keep in the conversation by?doing an exhaustive series of interviews and Q&A sessions. For a guy who is about to turn 80, he could not have been more?energized even with the daunting prospect of facing months of the “season” still to go.?Javier Bardem called on his cell from a street corner in Madrid to recount for me the intense experience of making Biutiful. Then I had to again race to the Four Seasons?for back to back bar chats with two other Best Actor wannabes, Kevin Spacey who talked Casino Jack before Aaron Eckhart arrived 10 minutes later to discuss Rabbit Hole.

With the exception of?Get Low, all of the above were spotlighting work in independently made movies that are mid to late December releases. But their stars cannot afford to wait if they are to get?on the map in this ultra-crowded season.?The ever-busy Spacey?was at the Britannias and an MPTVF event ?on Thursday night and also turned up Sunday evening at the Pacific Design Center for an actor-centric?post-screening Q&A for SAG nominating committee members. Like an episode of Inside The Actors Studio, the packed house gave him a standing ovation. Reliable eyewitness sources tell me ?even more impressive standing O?happened to Halle Berry two nights in a row at the same place where she Q&A’d her December stealth entry, Frankie & Alice for?the NAACP Image Award voters Friday and SAG Nom Comm?Saturday. They marked her indie’s first screenings but Berry wasn’t watching. She was out in the lobby doing TV interviews about what the project meant to her as an actress. Meanwhile publicists were frantically cutting film clips for the late-breaking entrant and hoping to have their DVD screeners out well before Thanksgiving. As part of her?campaign,? Berry will also be “in conversation” with a career retrospective Tuesday night at the AFI Fest.

Speaking of that,?the AFI Film Festival?opened?with Twentieth Century Fox's Love And Other Drugs. The glut of?AFI galas?is because it's an inexpensive way for distribs to do LA premieres this time of year and still get maximum exposure. They included?The Weinstein Co’s Blue Valentine with co-star Ryan Gosling and director Derek Cianfrance on the carpet? at the Chinese. While down the street at the Egyptian, Sony Pictures Classics unveiled their comedy Barney’s Version with?superlative performances from stars Paul Giamatti, Minnie Driver, and Dustin and Jake Hoffman who were all?on hand for the stroll down that red carpet.?The film, based on the Mordecai Richler story and?previously seen in Venice and Toronto, was a hit at AFI with special praise for absent co-star Rosamund Pike who could find her way into the supporting actress race. Pike also co-stars in another of ?SPC’s Oscar hopefuls, Made In Dagenham, which has it’s LA premiere tonight? at AFI opposite Casino Jack with yet another appearance? from?Spacey.

There also was?the LA premiere of?The Weinstein Company’s?much-touted The King’s Speech --?which one recent Oscar-nominated producer described?to me?afterwards as “a wet dream for the ?Academy”. A pre-unspooling Q&A moderated by my pal Leonard Maltin featured director Tom Hooper, Colin Firth, and Geoffrey Rush who got sprung from Hawaiian locations of the new Pirates Of The Caribbean fourquel in order to make the quick trip to L.A..?Screenwriter David Seidler's decades-long efforts to tell this story made the film even possible and also was there but wasn’t a part of the Q&A.?Guess it just shows the status of the writer in Hollywood (or at least at the AFI fest). But I think it is?shameful that he wasn’t on the panel. Thankfully, Hooper got a chance to at least acknowledge him in separate remarks intro’ing the film.

I caught up with Seidler at the crowded Hollywood Roosevelt?party. At 73, he’s being portrayed as an overnight sensation. But the veteran writer is getting pissed about that falsehood. “The Hollywood Reporter said I was an unknown in their headline when, in fact, I’ve been around a long time and been nominated three times for WGA awards and won once,”?he told me. He pointed out that the paper could?have just looked?on IMDB where he has many top credits including Tucker: The Man And His?Dream which he wrote for Francis Ford Coppola.?When I asked him to clarify the Original Screenplay status of the film, he said that has also been misrepresented since some reports?have inaccurately said it started as a play. “I wrote it originally as a screenplay but then, as an exercise to improve it and solve some structure problems, my ex-wife suggested I re-write it as a play which I did. Once others became involved, though, it reverted to its original screenplay form.”?he emphasized it was never produced as a play, thus making it eligible for the Original Screenplay category where thankfully it doesn’t have to face off against Aaron Sorkin’s much-liked adaptation, The Social Network). Ironically, after the movie is released, it now?will become a play. Seidler says it was going to open?in March on Broadway but that was thought too close to the Oscars. So now?a West End opening in London?with acclaimed ex-Royal Shakespeare Company artistic director Adrian Noble?signed?to direct is planned.

I asked if King George VI's daughter, the current Queen of England,?had seen the movie and he said only her staff has viewed it so far – and liked it. But?Harvey Weinstein told me he’s working on getting her to see it. Harvey is understandably ebullient about the Oscar buzz for the movie but?is not?overplaying his hand too early in the game. As he told me, “I’ve done this a few times. Trust me. I know what I am doing.”

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