I may have posted this before… but the point I want to make is - it’s interesting that they talk about the numbers of puts traded - not the VIX. It could be that since the advent of dynamic option hedging, option sellers are not so interested in bidding up the prices during declines - because they’re not afraid of losing money (all they need to do is short more futures, as per their formula).
But, OTOH, in recent years we’ve seen VIX reach some very high levels. So, the hedging doesn’t entirely stop the buyers from bidding up the VIX. Who knows, maybe under crash situations the fear becomes too strong. Maybe people really get worried that the selling by option hedgers (in addition to panicking investors) may at some point create systemic problems.
There is a guy by the name Victor Niederhoffer, who was considered to be the best trader alive. During the crash in October of 1997, he kept selling puts - expecting the markets to bottom soon. But, the markets kept crashing. At the end of the day, Victor was bankrupt - along with having destroyed his client’s accounts. It occurs to me that had he simply sold short an appropriate number of futures contracts - and covered them as the market recovered, using the Black-Scholes formula - he would not be bankrupt - to the contrary, he would have made a serious fortune.
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