August 13th

Got a message today from a friend, seeming to agree with the idea of VIX Puts, but noting that with traders on vacation, volatility tends to be higher.  My response was:

'I got VIX August Puts at 1.71 and they're at 1.85 with the VIX just above 26.  They expire on the 22nd (9 days) so yes, I'm up against a loss of time value.  Good point about traders on vacation.  Is that the concept of arbitrage, where the smart money smooths out pricing fluctuations?'

I was then reminded that arbitrage is the simultaneous buying and selling of a security in different markets to take advantage of perceived errors in pricing, a situation that is actually enhanced in a volatile situation with fewer traders.  Different from the concept of enough buyers to sop up a selling binge.

So we'll have to see what happens to the VIX.  Today was less volatile.  Indexes down fractionally.  Noting that the Russell 2K is down more than the other major averages during this correction, so as things settle down, I wonder about shifting money back towards small cap from global large caps where we've been advised to be.