Good Morning! Yesterday we got our undervixed bounce, so today's premarket drop is no shock to my followers. The drop is overvixed, but not to the extent that I'd expect. When do I expect a bottom? When yesterday's undervixing is exceeded.
That's when I'll put on trades. Actual trades will be on the VIP account for subs, but in general, I like 17Dec flies. Some things I noticed in this drop...
First, $RUT $RTY $IWM have sneakily entered correction territory. In the bounce yesterday, $RUT dropped, causing severe overvixing in that index. However, $RUT is a lot less flow driven than $SPX. So if you trade that, make sure you size appropriately.
Second note, a lot of the vix increase is reflected in the put skew, making this market very sensitive to IV changes. If we overvix, expect a strong initial snap back to normal vol, then a smooth Santa rally that may seem outsized, averaging ~.25% per day.
Whether traders are hedging debt ceiling or Omicron, overvixing IS the "wall of worry" markets will climb. Third, the term structure has premium showing up in weekly and monthly terms more than daily. If trading both, go long gamma in short term and short gamma in long term.
Finally, @RedBarnfin, a financial planner & CFA I work closely with, looked up "overvixing", and my tweets showed up as the 2nd result! The 1st was an @urbandictionary term meaning female swinging... coincidence? 🤔 Mission today, get #overvixing trending. You can do it wizzies! 
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