Trade Alert: Portfolio 1 — May Hedges Didn't Work, Reloading Smarter
Six weeks of grinding rally made hedges ineffective
Market Regime Read — Where We Are Right Now
Volatility: VIX still near 17, /VX near 19 — compressed despite yesterday’s CPI surprise. The market shrugged off hot inflation data within hours, which tells you the bid underneath is real. Vol compression at these levels remains fragile — but fragile doesn’t mean imminent. Could stay here for weeks.
Momentum: SPY pulled back 1% intraday yesterday on CPI, then reversed hard into the close on China trade optimism. That V-shaped reversal is a momentum signature — buyers are aggressively defending every dip. Six straight weeks of rally. The market is historically extended but refusing to break.
Catalyst watch: China trade talks producing positive sentiment. FOMC minutes this week. Market is trading on narrative momentum now — good news gets bought, bad news gets bought after a brief dip. The risk is positioning-driven: when everyone is long, the exit door gets narrow fast.
What this means for YOUR book: If you’ve been short delta or hedged, today is about acknowledging what isn’t working and repositioning. Hedges that are bleeding theta against a relentless rally are a drag, not protection. Replace them with structures that cost less to carry (wider call verticals, longer-dated) and keep your put income engine earning.
TonyR Commentary
