Show: Market WineDown Episode: 2 Title: VIX Hit 36, the TACO Trade Struck & Volatility Skew Explained | Market WineDown Show Ep. 2 Date: May 08, 2026 Runtime: ~30 min Video ID: ofKqOsxPcCw URL: https://www.youtube.com/watch?v=ofKqOsxPcCw ============================================================ Happy Thursday. Welcome to the market wind down. This is my co-host Mark. And I'm here with Lex. And you are about to get wound down, right? All right, Mark. THIS IS SO MUCH FUN. I'm so excited. The idea here is and again, this is our second taping of this. So it's um it's a show about the markets first. It's not as fun to talk about the markets cuz we like to drink wine. So just so you know, and I'll let Mark tell his little biography in a second. We both collect wine. Right? And we're really big You see Mark's wine cellar behind him. I'm not in my wine cellar, but sometimes I will be. Um we want to make this a life style show. What do I mean by that? We want to talk markets, the serious stuff, but we also want to have a little fun with it. You know, we'll be on trips, we'll be in good restaurants, we'll be in our wine cellars. We're always going to be drinking wine. And we're going to talk a little bit about the wine at the end of end of each show along with all the commentary on the markets and what's going on. Fair enough, Mark? What do you think? What can you What do you want to add there? Well, cuz like where when you were on the trading desk, when you were like, you know, actually in there in the pits, where did you spend your time talking about it? It wasn't during the trading day. It was after. It was over a beer. It was over a glass of wine. It was at dinner. That's where you digest what happened. That's where you process what's going on in the market. That's where you have a chance to enjoy yourself and, you know, chop up chop up what happened that day, that week. Yeah, I agree. Do you Let me ask you another question about the wine and and trading. Um so you and I both come from the floor days, which, you know, technically doesn't exist anymore, okay? The way we knew it. Do you think What's the Why is there such a high correlation of traders and and wine consumption. I'm not talking about drinking per se. I'm talking about collecting and the little bit more of the finer points of of of wine ownership and and enjoyment. What what Why is it so tied into trades? Cuz there's a lot of money around it or what what do you think? I mean, let's be real. Everyone likes a good buzz. I think there's something to that, but the idea of this like asset that has so many like, you know, different characteristics to it. Like, do you like that because of its region? Do you like that because of its special vintage? There's like so much to wrap your head around about like why this is interesting and why this tastes good and why it's going to make me feel good. And, you know, I think there's, you know, it's just very well aligned with the trading lifestyle. Okay, fair enough. Fair enough. Um yeah, cuz I got a lot of buddies and I know you and I have a a mutual friend who's really big into the wine. He may be bigger into the wine than I am and you are. I don't know. And he's his cellar is nuts. Maybe both of us combined. It could be both of us combined. Anyhoo. All right, let's take a look at the markets. Um I'm going to go down the line. You can comment as you'd like. Um today S&P's up about 42. Nasdaq up 187. It's hovering around 23,000, little under 23,000. The Nasdaq Dow Jones is up back up to 48,000. We've had a pretty good rebound this week is what I'm getting at. Vix, of course, down from its high. I I want to say there was a 35 handle on the Vix earlier in the week prior to Trump speaking on the Tuesday night night about what would happen if the Iranians did not agree to a ceasefire. So, I remember 35, 36 handle on the Vix at least on on, you know, on the SPX uh markets I was looking at. Does that sound about right there, Mark? Yeah, but now we're we're pushing 20. I mean, we could see the teens if uh if this trend continues. It's Yes, I'm seeing just under I'm seeing 19 and a half uh more or less. Um you know, and we were talking pre-show if you're in the premium selling game, which I am, maybe you're not probably as much as I am, but uh it's gets tougher to sell premium down here. You know, there's a certain argument that goes, well, if volatility is low, it's low for a reason, you should probably sell it. Hm, okay, interesting. I don't I don't necessarily disagree. It just maybe depends on a little bit what's going on with the underlying. Um, any thoughts on selling low volatility? Does it Is it kind of counterintuitive and you should smoke it a little bit? Slap its little fanny? Always. Uh, but no, I I actually find these transition environments were like one of the most difficult to navigate, right? Like, are we moving down into like that like teens, low teens, like vol smashing environment? Or is Are things going to tick back up again, right? Like, the way we're flirting around this, you know, upper teens, 20, 20 number, right? Like, that still means 1% a day moves for the market. So, it's not exactly low volatility. It's lower than we've seen, uh, but it's uh when vol regimes shift, I think that's where you got to be, you know, the most attentive to what your strategy needs to adapt. Yep. No, I agree. Um, so for the week, uh you know, I I think the big story again this week um is is got to be centered on a couple things. Uh, geopolitics at the at the grand level, right? At the the general level. But within geopolitics is is certainly oil. And the reason oil is so um focused on in this in this situation is because there's that little strait over in the Middle East that called the Hormuz that is very important to to oil flow, right? And you know, I think Trump and and and team are trying to make sure that that free flow of oil is is, you know, unim- unimpeded. Um, so once that word got out, that was I think it was Monday, if I'm not mistaken, because the risk was, do you want to have a Tuesday position on if you're a premium seller with knowing that he's going to talk or maybe it was Wednesday talking about things on on Tuesday night. My belief was I think the bad news is predominantly out of the equation right now. Okay, short of I'm going to drop a nuke on you. I think it's predominantly out. I thought his announcement was going to be a massive upside move. We got 1,300 points in the Dow in a single day as a result. Now, I was right on this one. Don't think that I'm a genius cuz I'm not. I have no idea which which direction things are going. But I just felt like the big risk in this example, as you listen to the narrative, the political narrative was really an upside kind of kind of you know, risk. What what what did you think Mark? You know, for the whole drawdown that we've been seeing over the last, you know, 2 months now, uh there's been a steady call bid. There's been a steady flow of buyers of upside calls because of exactly I think what you're talking about that people have been predicting, speculating that, you know, when the market rallies, it's going to rally, you know, sharply, which is what we did finally see. And, you know, whether that strategy pays out all depends on, you know, what tenor and premium you're paying for it. But, you know, that idea that the the taco, the Trump always chickens out trade is you know, is we've been seeing that steadily put on across the market. So, what is that Trump always chickens out meaning that after the bad news comes out, the taco trade is get long because he's going to chicken out and everything's going to be good. Tariffs, the war, this that and the other thing. Is that right? He's he blusters, right? But that's exactly the word I was going to use. A bunch of bluster and then at the end of the day, a bunch of threats, a bunch of deadlines, ultimatums, but at the end of the day, you know, what's what's good for the goose is good for the gander, right? And it's not great for American policy to, you know, treat things like an ultimatum. So, we see the chicken out again. All right, I like it. The taco trade. I didn't know what that meant. I had to ask you that on another show the other day. That's that's interesting. Um so, oil's collapsed from Nothing to do with Mexican food. Nothing to do with Mexican food. So, we'll talk about Mexican food another time. By the way, Mexican wine, not super knowledgeable, but I've got some good ones. So, we'll get to that that's down the road. Um oil. So, excuse me. Back down under 100 today just a little bit. Um I think it kind of got above 110 at one point, right? Um and then once this news came out about the ceasefire, blah blah blah, um it collapsed 13 15% a single day on the ceasefire news, right? So. Yep. And we're seeing the same upside volatility, right? Like it was spiking up 10 12% a day also. Uh so, you know, that I want to say USO is around 90 95 ball. I don't know what it is today. It's probably a lot less, but, you know, historically that's been tracking pretty high. Which means expecting, you know, 5% moves a day, call it 6% moves a day. Which is insane. That's a lot. That's the other thing about the VIX. At 16 19 20, like we're still talking material moves, right? VIX in the upper teens is still expecting the market to move and chop a decent amount. So, you know, we're we're far from out of the out of the woods here. Yeah, what is a what is it like a 20 VIX mean in SPX? That's uh 0.2 times One and a quarter a day, something like that. Where is the Where is the SPX? Is it 6800? I get I get these numbers all confused because they change so much. I'm doing it on the calcul- I'm going to the calculmacator. It's 6800. big ones. Pull out the calculmacator. Yeah, I'm at the calculmacator. Don't We're going to explain what I'm doing one day. That's an $86 move in the SPX at 20% daily. Intraday move. That's a big number. It puts 150 in perspective, right? Like Jesus. Put 40 in perspective. We're we're moving half the what the daily straddle might expect. Yeah, right? That is I didn't realize that. That's a big move. You're right. That's a 1.2% move daily. Wow. I need to get paid more for that. Selling that premium. The we finally saw like that call skew has been for a long time and we finally saw it flip around actually after that big rally earlier this week that like finally puts we're coming back in demand. Right. Yeah, I don't know I don't have a clever acronym for what that trade is, but you know, stuff could go the other way, too. Yeah, no. So, that's a good You mentioned the skew and I was going to get back to that, but which I which I'll do now since we're here. Um A lot of people don't know what the skew is, right? What it means. Let's kind of Let's kind of work on that a little bit real quick because I think it's fascinating, especially in a in a product like SPX, which is which I'm going to call a macro index. Okay? The What I mean by that is it's got 500 stocks in it. It you know, it might be concentrated a little bit more today than it used to be in the old days, but it still has a good swath of of the marketplace. I think in the in in the old days, the we traders, we would never look at the Dow and you may not look at it anymore either. I don't. Um we would look at either Nasdaq, QQQ, or S&P, spoos. We called them spoos, right? That was the market does. If you ask me what was the Dow up today, I could tell I couldn't tell you it was up or down. I know what the spoos did though, right? Period. So, back to the um the skew. I'll let you handle this, but tell us a little bit about So, what does it mean? How do you measure it? Is it Give me me delta of the option you're thinking about generally. what does all this mean skew? Where did it come from? You know, what is what is skew? There's a very long answer to this question. We're going to make a very long complicated answer to this question. But, at the end of the day, right, options are about pricing volatility. They're about pricing the implied volatility of how much they they're pricing the implied volatility they're pricing is how much the underlying is expected to move over this time frame. Right. What the skew starts to talk about, you know, we can talk about the at the money volatility of the current, you know, forward value of that index or equity. What are we expecting, you know, to vary between now and expiration if spot stays the current price? Yep. What skew starts to talk about is the different degrees of volatility that are going to be experienced if we move up, if we move down. I think, you know, anyone that's traded a little bit in these markets knows that as stocks move down, vol moves up. So, we start to see this kind of like relationship between spot going down, vol going up. Mhm. And the skew curve starts to describe that. They It says that, you know, at the money, at the 50 delta option, we expect implied volatility to be here. However, if we get down to a spot level that's say at the 20 delta level, the reason that 20 delta put is at a higher level generally than the at the money is because given everything we know today, if spot goes down there, we expect the kind of vol environment to be higher. Um and the skew describes that relationship. Uh and so, it of course reflects like the predictions of what people are, you know, expecting volatility to do at those levels. And all that's driven by order flow, right? So, if there are a lot of call buyers, they're going to bid up the call skew. If there are a lot of put buyers, you know, which is the kind of more traditional order flow, that that's going to create higher downside volatility. Mhm. And so, the movements in that vol relationship are are what we talk about as skew. Okay, perfect. Um that's a great explanation. And I think, you know, typically what what we pros look at in terms of a delta to compare skew is about the 25 delta. Is that fair? Someone might say 30, you know, it it it varies between like a 25 and a 30 delta option. Is that safe to say? Totally agreed. 20 to 30 for kind of the meat of the skew. You can talk about the extreme wings if you want to go out to 10s, but I totally agree with that 20 Yeah, yeah, 20 to 30 range. Yep, 20 to 30. Let's call it 25 just to argue. So, what we typically look at is what is the vol difference between that 25 delta put and that 25 delta call. Okay, if it's four volatility points, we would, you know, we could characterize that as a four slope or something like that. We won't get into that now. But what happens is this is that Mark mentioned earlier that that upside calls were bid more. Okay, that doesn't necessarily mean they're higher than the 25 delta put, but they are out of that $4 or four vol point range. And maybe it's one now as opposed to four, right? So, what's happened is it's shifted and gotten flatter, meaning that there's a higher demand for that upside call. People thinking, guess what? Trump's making this announcement announces we're going to be up 1,300 points. I know it's going to happen. I know I'm going to buy some calls to take advantage of it or protect myself, right? That generally kind of what's going on in the minds of the of the investing public? I think that is. I think that like for the last two months people have been buying calls expecting that breakneck rally that we eventually had. Um I don't know that all the call buyers along the way were, you know, paid out for, you know, their purchases, but yes, there's been a persistent, you know, demand for that upside more so than the downside. Yeah. But as we've trickled down the the taco buyers have been coming for upside calls. Right. Yep. And I'm I'm absolutely seeing the same thing. I'm going to make a plug for our platform. You can see that in the platform, uh Trade Your Pro. I'm always making plugs. And you're going to make some plugs on the till and all that kind of good stuff, too. Um but you can see that kind of skew variation uh in the platform, which is kind of fun. Um and we're actually making it better. There's going to be a new coefficient uh value that's going to be in there. Don't think it's a fancy word. It's really simple. You're going to understand it. Green means go. Yellow means, you know, kind of pause with or yield, sorry. Red means stop. You'll see it. Super easy. Um okay. I know we're going to talk about market making stuff. I want to do that on the next show 100%. What do you think about that idea? I can't wait. Cuz cuz I'm at the 15-minute mark. We're at the 15-minute mark. You know what we need to talk about? We got to talk about the good stuff. We got the good stuff to talk about. Oh, I was you know, I was Oh, look at you. waiting for you to open this. Is that a Is that a burgundy glass of sorts? I can't see it very well, but is that considered one like that? It is a nice burgundy glass here. Yep. This is my special burgundy glass. How many different glasses shapes do you own? Uh I have my like good burgundy glasses and my good cabernet glasses. Okay. And then I have my universal glasses. And then I have the assortment of everything that has still remains after all the other ones that have broken. That's good. I love it. I just bought a glass. I think I showed it in one of the beginning shows. It I think I could fit my head in it. I I I I think I could put my whole head in the glass. I certainly get my whole arm in there to clean it. I mean, it's it is this tall and it is massive, you know. I mean, it's just huge. And my my son loves wine. He always comes That's the first glass he he grabs. That's an unreported benefit to get your hand in there to clean it because like some of the narrow ones like yeah. Yeah. This little guy right here I'm not going to I don't want to show you what's in it. This little guy right here is really tiny. All right, let's get busy. I can't wait. All right, you're not going to be you're not going to be impressed as I am. This is fun. It's it's different. Okay. First of all, I am going to dinner tonight at an Asian restaurant. Let's show the Asian Asian food I'm about to eat in, I don't know, 3 4 hours from now. Um look at this stuff. Delicious. This looks fantastic, right? We got some We got some lettuce wraps here with the with the ground chicken. There's all kinds of good stuff in there. I see some dumplings, um a little soup. I'm sure I'm getting a hot sour soup, a little salmon in the back row. This is my smorgasbord tonight. So, I said I got to have a wine for this. How spicy are you going on this? Well, I'm a big spicy guy, but my wife, who's who's coming with, if she behaves, I'm kidding. She's she's not as spicy. So, we're going to let's call it medium. Okay. Okay. All right. So, that's the food I'm going to have. Back to us. So, um I decided on a white wine for dinner tonight. Right? What do you think What do you think off the off the cuff? Oh, my my knee-jerk, you're saying Asian food, little bit of spice, white wine. I mean, I'm laying good odds that's a Riesling. Oh, dude, you're killing me. You got me. You covered me. So, it is a Riesling, okay? And here's the deal. All right, that's what the that's what this is, right here. Um it is not a German Riesling. So, you Do you know about Rieslings? I'm a little disappointed in you. Is it Is it Austrian at least? No. No, no, no, no, no, no, don't be silly. Finger Lakes, maybe? Nope. Nope. Nope. Nope. This is a high-end Riesling. Okay, first of all, I'm trying to look for where where this is. So, the Riesling, how would you describe the a typical Riesling? Well, you have do you have some some note profiles on this thing? I think Riesling's one of the most under appreciated wine. It is so good. It is so food flexible like, you know, like for the type of cuisine that you're going for like works very well with that, but it also, you know, to your German point, right? Like cuts against like a fatty schnitzel or something like that, too, right? Like fried chicken is great with a Riesling. It almost has like a little bit of that effervescence. Um, but to me when I smell like the great Riesling, it's got that like petrol nose, right? Like you almost get like a little bit of that like gasoline taste. And then I mean I know that doesn't sound incredibly palatable for a wine, but the the petrol on a good quality Riesling is, you know, to me the signature mark, but like bracing acidity, um, little bit of sweetness to it, um, but not necessarily like annoyingly sweet so much as like, you know, generally fruit sweets to it more like a fructose sweetness. Um, Oh, I love a good Riesling. Mouthfeel is very viscous. Yeah, it it all that is is absolutely correct. It's it's a wine I don't drink often. However, the one you're about to see and learn about, not yet, uh, Luis, don't show it. Um, is way different, okay? Um, so this doesn't come from the banks of somewhere in Germany. Okay, as I just said. First time I had this, I had it in this country and I they they blind tasted me and I said, "God, is that I got to hate to say this, but is that a Chardonnay? Is that a Sauvignon Blanc?" I mean it was so just like almost a butter, but not I don't like I'm not big on the butter thing, but it was bigger butter than I expected and bigger pound you in the face than a Riesling should be or that I'm used to. I said, "What is this?" And he showed me the bottle. Can you read that, Mark? If you expand. Uh from the Louise. So, this is a Napa Valley Riesling. Swear to god. Okay. All right. Now, you're I know you're in just disbelief. It's It's from uh the Louise. It's by Palmaz. Do you know Palmaz, that that maker? Familiar with them, yep. Okay. So, Palmaz is um it's from uh Oh, what was his name? Uh a doctor, okay? And my doctor friend invented the inflatable stent and patented. And guess what he did? He sold it to um He sold it to Johnson & Johnson for a few billion dollars. So, every stent that's put in a person who needs a stent, it's his product that came that that that came that came from. So, needless to say, he's very wealthy. He built this winery in Napa that is called Palmaz, and I'm a member of the club, and he built it into the into the mountain. It's in the cave. It's magnificent. We'll We'll show that in a second. But, I go to this tasting, and one of the first wines that I have is this is this Riesling. And I said to the guy, he didn't show me the bottle. I said, "Dude, what is this? I love it." Didn't taste like a Riesling. It was It was a lot drier and a lot rounder. Didn't have a lot of that, you know, that that what apricot honey kind of profile that some of the the German Rieslings have. Um that I also like, but it was way different. Just way different. I said, "I got to see." And he shows me the bottle, which is, you know, this Riesling. I go, "Are you kidding me? No way. I love this." Ended up buying a case. I've drunk it all, but I've ended up buying a case. So, you got to try this, by the What's it meant for? What do you feel bad about? That's what it's meant for. So, just so folks know, if you're if you're ever interested in this, um it's it's it's not cheap for a you know, Rieslings are probably a little bit on the cheaper side, I would I would imagine. Um my I can't remember what I paid for it, but I want to say it's probably 75 bucks a bottle, which is probably on the higher end for Rieslings, right? Um but out of this world. His Mr. Dr. Paul Hobbs, which isn't his last name. Um he built this thing into the cave. Let's Let's show the picture of the cave. This is the winery I was at um in Napa. Look how gorgeous that is. He owns like I'm going to say I can't remember 600 or 6,000 acres built in the mountain down in down in Coombsville, Napa. Over the mountain and beyond. He's got all these little microclimates that he's he's labeled. But the coolest thing about this place is you go into the where they make the wine and he did it with a centrifuge or centrifuge technology. So, he built it from the top and it natural gravity spirals the wine down this building into the into the bins. He takes and puts it in in their places and he ferments that way and does his thing. And you go in this place, it looks like a Star Wars episode. It is all on the on the ceiling and you can punch buttons and it shows you the Brix levels in these wines. It shows you, you know, where how they're how they're ripening and it's all mathematically formulated on the thing. It's like a NASA, you know, space station. Unbelievable. Unbelievable. I've never seen anything like it. So, that was his Oops, sorry. That was his due. Um and I just fell in love with the wines. Now, the the Cabernet, he's got the big boy Cabernet, which is the Gaston, g a s t o n is the is the vineyard designate. Um he's got some several of those. They are not for the lean of heart and and pocketbook. They're they're pretty pricey. I want to say the Gaston is in the $300 range a bottle. Um but out of this world. I mean, it is another level of of Napa wine, in my opinion. Hard to get to. We got to get you to pinch your nose when you pronounce that. It's the Gaston. Gaston. Gaston. Mark's a big French guy. There we go. Yeah. Um I took a little French, so just don't remember it as well as you do. Uh But anyhow, this is fantastic. It's a great wine. I think it's going to go good really well with the Asian food. It is called Palmaz. It's a Louise and Napa Valley Riesling. They're probably they're selling the 20, what do you think they're selling now? The 2023-ish? 22? 20 maybe 24? I don't know. This is a 2016 though. It's a little bit older. Ooh, there's nothing like aged Riesling. Really good. I mean this is this is electric. I love it. But what's going to happen with your Napa Riesling over your German one is this is going to be bolder and and and have a lot more body to it, okay, for sure. So it may even pair well with like a roasted chicken or some pork or even some of the creamier dishes out there, you know, and whereas a German Riesling might be a little bit better with the sushi and Thai food, spicy food, lighter seafood. So it might be a little different. I you know what? I'm not too particular. I'm going to I'm going to let it have a run at it. So that's my spiel, Mark. I'm sticking to it. What do you think? I love it. I love a good Riesling. I I am you know, you wouldn't tell me about your choice before this show, so I'm coming at this totally blind, but I I think the the choice is exceptional. Especially for what you're having. I mean there's you know, I would be partial to maybe a German or Austrian Riesling. But you know, a nice Mosel Valley. You know, the but the it's an incredible grape. I think it's an underappreciated grape and I think you know, going out and getting any style of Riesling. They make very light Rieslings, you know. They make ones that are less than 8% alcohol that are you know, a very friendly easy drinking. 100%. So that's great. So a little bit of twist on the wine tonight. We're only going to talk about one a day I think, right? So we're going to flip flop back and forth. Mark's going to do the next one and you know, I'll do the one after that so on and so on. But Mark is drinking a red. If you want to kind of give it some some praise and some kudos here. Let's do that before I have to wrap up here in about 2 minutes. Uh will you pin me right on the burgundy glass? I'm going with a red burgundy. Um mostly cuz that was the only clean glass I had down in the cellar, so I figured I had to I had to match the the wine with that. Um I got a classic uh bone uh premier cru uh Les Tous Saints vineyard. Um but I think the the bone wines tend to be like, you know, give it give a lot of good structure. They're very classic burgundy. Um you know, at 10 years old, 11 years old, we're starting to get some of those tertiary notes out of it. Uh you know, really like the forest floor comes out of a burgundy. Wow, the forest floor. Jesus. Is that where the truffles are? Exactly. Truffles, wet mushrooms, damp, you know, I mean, none of these sound appealing, right? I'm talking about petrol. I'm talking about damp forest floor. Like, how is this attractive? Uh but honestly, like those are some of the best flavors in wine in my opinion. I agree. I agree. And you know, what I Just so folks know, you know, I would say that some would say you're a wine snob. I'm actually not a wine snob, actually. I don't think. Um I have tons of wine, and Marcus has tons of wine. Um Mark might be a wine snob. I'm not sure yet, but you know, I'm not a wine snob. I will drink just about anything, but I do like I do like pairing wines with food. Right? I think that's fun. And I think it doesn't mean that the the food's going to be better or worse. It could be better, but it it's just it's just fun to just get that flavor profile of the wine and have it, you know, just kind of sync with the food really well. I think it makes everything better. It makes it an occasion. It makes it like a reason to have both of them. And they're both better because of it. I agree. I love it. I'm I'm glad I I like wine. I'm glad I drink it. I know Listen, I I get it. Some people might not be able to drink alcohol anymore. I'm you know, I'm not trying to push push that um or be negative to that, but I get I totally understand that. But if you are you can have some, having a great wine paired up nicely with with some great food or even just cheese sometimes. It's just a lot of fun. Right? Oh, all day. Perfect. All right, man. Like I said, it accentuates both of them. I think it's like wine was made to be served with food and I think good food is meant to be complimented by good wine. Yep, I agree. Well, you know what a time it is, buddy. It's time now for us to clink. You got to make sure you go the right way. You got to go the opposite of what you think. All right. All right, here's. Cheers. Dink. All right, that's a wrap. You know how the financial world goes. Here comes the buzz kill. Please make sure to take some time to read this boring disclaimer. We will owe you one.