Evil Diaries: I Visit The VIX

Readers might recall that a few weeks ago I took Tom Hayes’s advice and sold the Yen/USD figure – up at about 160. He reckoned that the ‘carry trade’ had taken matters too high. (Be it noted that the higher the figure the weaker goes the Yen – this is muddling unless one stops to check one’s view – but one can get the hang of it.)

The result was that I made a few bob. 

The ‘carry trade’ is the practice of borrowing in Yen (where interest rates are practically nil) and ploughing into other currencies such as the dollar. This is fine provided the ‘carry trade’ does not elect to unwind. And it certainly can do. And this leads to massive repayment of Yen-denominated loans and the Yen/USD rate drops sharply as Yen are bought so to repay loans denominated in Yen.

A way of judging how close the carry trade is to unwinding may be following the VIX which is a product of the Chicago Board of Options Exchange. The VIX is a composite figure (how derived I do not know) reflecting the speed at which share prices are going up and down and the extent to which they are going up and down. Typically the VIX stands at about 10 but of late it has shot up to 49 at one point – or, put another way, it must be regarded as indicating an excessive frenzy. That was the moment Tom told me. And profitable it has proved.

The quote at Trade Nation, whom I use, is 0.06 spread on about 30.00 right now. I do not know how this spread will shrink or expand in practice. If I reckon I have come to learn more about this instrument I will let readers know. I need hardly add that I am a novice on this trade. I would therefore welcome comments from readers who really know what they are talking about.

FWIW (perhaps not a lot) I have bought the YEN/USD rate at 145.75. I have sold the VIX at 28.2.

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I forgot to mention that, seemingly, Tom is headed to the Supreme Court later this year to get his conviction for fraud overruled. I hope that at long last the massive injustice meted out to him will be brought under control.

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It is a pity that Starmer labels rioting protesters as far-right thugs. Thugs they are. But “far-right”? This is dog whistle garbage. And it will not help.