VIX to 80 Upon a Disorderly Greek Exit

“According to some, the next Lehman-like event will be none other than a Greek exit from the Eurozone, especially if not firewalled, or in other words, disorderly. Considering how effective the Eurozone has been to date at anything orderly, it is a fair assumption that any Grexit-type event can only be disorderly. And while we appreciate that now flailing Spain has gripped the public’s attention and been exclusively in the headlines for the past week, or ever since the start of the Greek poll moratorium, we can’t help but recall that we are less than 10 days away from June 17, and the fact that for all the media disinformation, anti-bailout Syriza is likely to be the winner in the election, getting the automatic 50 extra seats that will make it likely it forms an anti-EUR government with a next step: Grexit. Pardon: a disorderly Grexit. The latest firm which see the Grexit as nothing but the coming of Lehman 2 is Citi, which in this convenient matrix predicts that such an outcome would lead to the same VIX at 80 outcome we saw in those days of September and October of 2008. Perhaps, for ole’ fat tails sake, it is not a bad idea to buy some VIX calls here just in case.

Of course, if the ITA-BUND spread hits 720 bps, there will be bigger things to worry about than what counterparty will have the cash to make good on the other side of that VIX bet.

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