We all know the story very well now. Millionaires made out of shorting volatility, the can’t lose trade. Macro Risk Advisors know the volatility market better than almost anyone, and have been warning their clients of the danger of this strategy throughout 2017. So in this interesting piece written by the excellent Pravit Chintawongvanich, MRA expose the inherent danger of such position in the VIX market. Chintawongvanich argues that VIX products could potentially buy 80 million vega on close on a +2 point move in VIX futures (a move from 11.3 to 13.3) and that the potential VIX rebalance size has doubled in 2017 (currently 80k, was previously only 20-40k). So for example, if this year’s Aug 10th move were to happen today, there would be $100mm vega to buy on close. In other words, VIX futures are experiencing larger point moves for relatively small moves in SPX, which could create some extremely large moves. While market participants may be well aware of this, what’s new here is the increased sensitivity and vulnerability of the VIX. We are in dangerous territory. MRA provide some good strategies here to hedge this risk. This note is essential reading. Click below to request access to the full note from MRA directly.