Speaking of VIX, look at the term structure of the futures, compared with the past couple months:
It’s well known that, in times of great stress, the VIX goes from contango to backwardation. Once everything cools off (and I do believe things will cool off), the contango will return.
The trade: VIX calendar spread
- Short Nov ’14 VIX future
- Long Dec ’14 VIX future
- Spread costs about 1.25 credit (that’s $1250 per spread) right now – when returning to backwardation, exiting the trade will be a credit as well.
Why I’m too chicken: if the fear has way further to run, there’s no end to the pain that can be suffered with this trade. I stay plenty awake at night worrying about my other positions…
If anyone else puts this trade on, let me know how it goes!