Friday, December 31, 2010

QXM/XING merger arb

With the surge in Chinese metal companies lately, the merger arb between parent XING and subsidiary QXM, which the parent intends to buy the remainder of, has blown wide open.  With XING trading at $3, the value of a share of QXM would be $6.70 if the deal goes through.

I'm long QXM, short XING.

Thursday, December 30, 2010

IBM chart looks beautiful

Nice consolidation between 144 and 146 in IBM at all time highs.  It's now flagging higher above 146.  The long looks beautiful.  I bought more calls with some time in them to let this stock play out

Monday, December 13, 2010

VLO now at the key $22 area

I've been long VLO from $20 about a week ago, and now it's getting to the big load-up price at $22.  Refining margins are still really strong, and VLO is still best of breed in a sector in which WNR and CVI have already run big-time.  Looking forward to the break to new 1 and a half year highs!

In other news, the position in Uptrending Equity: Swapped out puts for a long Dec VIX pos has been making me money pretty much every day regardless of market direction

Tuesday, November 23, 2010

Swapped out puts for a long Dec VIX pos

In reference to my earlier post Uptrending Equity: VXX should no longer have massive decay,  now Dec VIX is trading at a discount to the VIX index, while Jan VIX is still at a pretty good premium.  So I'm swapping out my SPY puts for a long Dec VIX position.  I'm in the money a fair amount on this trade from just the last few days

Monday, November 22, 2010

Good article summing up why I'm so gung-ho about long gold & silver right now

Soros explained it well, saying we are actually experiencing deflation while everyone fears deflation.  Pento is also smart in saying that the bull trend will not end until real interest rates are positive.  People like to call gold an "inflation hedge," but the data actually shows that gold performs well when US interest rates are kept low, and poorly when US interest rates are increased to counteract actually high inflation.  People point at particular things, like the recent rise in commodity prices, to say that we are experiencing inflation.  There is much more to inflation than commodity prices.  Specifically, housing, which is a huge component of actual prices, remains dismal, and there is a big output gap with all the unemployed.

Yes, gold and silver are the next bubble.  That is why you should buy it.  Your job as a trader/investor is not to pick tops or bottoms.  The trend is your friend.  Long!

Friday, November 19, 2010

Refining margins screaming

Prices of gasoline and heating oil over crude are screaming higher.  WNR has already moved, but many of the refiners haven't yet really priced in the move.  VLO looking great for a several month swing long.  Watching 22 area.  Should be worth at least 40/sh, imo.

Wednesday, November 17, 2010

VXX should no longer have massive decay

At this point, VXX owns almost entirely Dec VIX futures, which aren't trading at much of a premium to the index anymore.  But Jan VIX futures are still quite pricey, so I'm short that against some ITM SPY puts with IVs under 18%.  Not trying to lose too much time premium.  If Dec VIX futures begin trading at a discount or in line with the index, I'll swap the puts out for a long Dec VIX.  The pair (long Dec and short Jan) will be a slightly bearish on the mkt, since Dec will move more in line with the index.  Will keep that in mind.

Tuesday, November 16, 2010

Muni bonds

The carnage in muni bond ETFs (there are hundreds, just google them) seems to be now spilling over into some other bond ETFs, such as PHK and PGP, which are trading at steep premiums to NAV.  Maybe this will be the catalyst to cause them to revert to their NAV values (at the time of this writing, $9/sh for PHK and $14/sh for PGP

Tuesday, November 9, 2010

Monday, November 8, 2010

Inexpensive insurers

AWH, RNR, VR are insurers with great fundamentals and are hitting price highs.  They should go a lot higher.

Gold and silver new highs pretty much daily.  Zoom zoom!

Wednesday, November 3, 2010

Killed it on short TLT, long GLD plan for QE2 announcement

Wow, news was to buy even more long-term T-bonds than expected, and T-bonds still got railed.  Classic "sell the new" play.  Imagine how much I would have made if they talked more about easing in other ways!

Monday, November 1, 2010

Getting ready for Bernanke comments on QE2

I usually hate to come into news events with any kind of fundamental bias, and no matter what is spoken on TV, the big boys will ultimately push the markets wherever they want.  However, in this case, this is what I'm thinking going into this event:

  • Historically, Fed days are up days in the equity market, as the fear leaves the market upon words being spoken.  There is a fairly strong upside edge to being long equities going into the Fed day.
  • Last time QE2 was mentioned a few weeks ago, EVERYTHING (equities, gold, T-bonds) ripped higher
  • The market has been prepped by thinking that QE2 will be done through the purchase of T-bonds.  I haven't come across anything in which people have considered many other methods of QE (this is the key point for my pre-news trade)
  • PIMCO, which recently seems to have a direct line w/ Bernanke, has been selling volatility in T-bonds ahead of this event, meaning they don't think the news will move the T-bond market much.
  • Equities and gold have been pretty strongly correlated, probably due to their inverse relation to the low-interest-rate US Dollar.  Gold has generally been stronger than equities, as it should be, as virtually all global central banks would love to debase their currencies at this time.
Taking all this into account, I want to be long gold/silver hedged with short T-bonds.  My thinking is that if anything is uttered about easing through means other than through T-bond purchases, gold/silver will leave T-bonds in the dust.

Wheat contango and other ags

Prices of many ags continue ripping higher.  Any trend-following system would be long a bunch of them and raking it in lately.  In constrast, wheat is struggling to make any headway as the contango widens even further.  Stay short long-dated wheat futures and long other long-dated ag futures

Silver squeeze may be imminent

In the past couple years, I've read much about the supposed shortage of silver, and run through official government websites to see who's holding most of the open short interest in silver and gold, and came to basically the same conclusion as the gold and silver bug conspiracy theorists about commercial bank-dealers (specifically, JP Morgan) holding huge size short.

Now I read an interesting rumor about some other major players possibly going for blood.

Should be an interesting market going forward.  As expressed earlier, my opinion is that economic fundamentals support a much bigger move upward in the coming years anyway.

CDSs on Cardinal Health (CAH) widen

As mentioned here, price action in CAH CDSs indicative of an imminent LBO:

Great arb with a great chance of making money no matter what happens would be to pick up Dec or Jan calls with IVs below 30%, and short some CDSs against it.

Monday, October 25, 2010

QXM/XING merger

The merger arb on QXM is still ripe.  QXM filed a Form 13E-3 over the weekend in order to move the planned merger forward.  With XING priced over 1.80/sh at the time of this post, each QXM shareholder will receive over $4.2/sh in cash and XING stock if the deal goes through, which is still a big premium to current prices.  I'm voting my shares in favor of the deal.    I'm still waiting to consider shorting XING against my QXM long since the charts for both are still quite bullish given the recent bull raid in chinese mining stocks.

Wednesday, October 20, 2010

Volatility arb still ripe

As discussed earlier at Uptrending Equity: Volatility arb, volatility futures are still trading at a steep contango.  Since the monthly incremental contango in the VIX futures term structure is almost just as steep going forward several months, rather than tapering off less steeply as you go deeper into the term structure (which would be more normal and expected), I reached out to short the Jan VIX futures and bought Nov SPY puts with IVs of 16% to hedge, rather than shorting VXX, which is currently holding mostly Nov VIX futures.  I'll roll the puts over once we approach expiration more so that I'm not bleeding too much time value.  

Shorter term merger arb

I usually don't post my short-term trades on here, but with tons of volume coming into the chinese mining stocks lately (CHGS, SHZ, CNAM, CPSL, XING, QXM), the latter 4 stocks are still early in their moves.  With the bigger move up in XING, being at $1.85/sh as I write this, the buyout price for its subsidiary QXM, which the parent owns most of, is now $4.3/sh.  Currently priced on the market at 3.6, this is a steep discount for a stock whose deal is likely to go through given that the parent, which owns most of QXM, wants the deal to go through.  I'm long a lot of QXM from the 3.50s.  I expect XING could move a lot higher in the coming days, as well.

Friday, October 15, 2010

Wheat contango

Contango is blowing open in wheat, which is a strong bearish indicator.  Short a longer-term future when the front-month breaks a recent low, risk a small amount, and you have a good chance of a nice winner if you hold it a month or 2.

ABK is getting a bit whippy each day but I'm still long from .61.  Still long PMI as well.  With this mortgage fraud stuff PMI has the 2nd best upside besides ABK.

Wednesday, October 13, 2010

Refining margins been ripping higher for weeks now

Refining stocks finally starting to catch up.  My favorite fundamentally is VLO, but you don't really want to lay into the long until it gets above $22.  VLO could easily go to $40.  Priced under book despite continually making a nice profit even without the recent improved margins.

Wednesday, October 6, 2010

The Lunatics are Running the Asylum

Just came across this trade put on by the hedge fund Pershing Square during the height of the BP panic this summer: short equity puts and long CDSs.

If you recall, this is almost the opposite of the trade I had recommended in, when I recommended buying bonds and shorting equity.  While selling volatility during a panic is a legit strategy, they were absolutely on the wrong side of the trade as far as the capital structure arb goes.  Pershing took enormous tail risk had the stock dropped further to near bankruptcy or bankruptcy-in-fact levels w/o a credit event bringing value to the CDSs, which was  a very real threat.  In constrast, if Pershing was trying to pick bottoms in a panic, the more appropriate strategy would have been to just buy bonds or short CDSs.  My suggestion to short equity in addition to buying bonds would have brought about profit in every circumstance, allowing it to be levered to the hilt, especially considering how much size you could take in the bonds and equity of such a high-volume large cap.  If you noticed, bonds have rebounded pretty much completely (nearly 100% gain), while the stock has bounced back only 15-35%, depending on where you would have managed to close out the capital structure arb.

Wow, and I'm the guy trading my own peanuts worth of cash to scrape by in the markets?  I'll take the Yalies' money any day.


Been absolutely killing it lately.  Haven't had a negative day for weeks.  As of today, I'm looking for further strength out of my ABK and PMI longs (ABK is more likely to squeeze more quickly) while I'm short MBI.  Last time I checked, the CDSs on PMI were cheaper than on MBI, so credit guys think PMI is lower risk than MBI, yet MBI has been the only strong one the last few months.

Refining margins are taking off, so VLO is the best of breed as seeming very inexpensive fundamentally, but I'd like to see it above 22 before I really lay into the long.  Could be a good entry above 17.50-17.60 area, too, if you want to risk a lot less to get in earlier.

Monday, September 27, 2010


IBM is hitting new all time highs.  As I wrote before, the fundamentals look very enticing for such a large cap.  Assuming the overall market holds up, I would not at all be surprised to see it at $200/sh within a year as everyone starts piling in.

Thursday, September 16, 2010

Sitting pretty

Re: the trade I posted previously (Uptrending Equity: TSLA option arb),  the interest rates on the borrowed shorts are falling off a cliff every day now, so the negative carry is dropping sharply while the implied volatility disparities between calls and puts is also dropping sharply.  Making me a bunch of money every day now.  

The VXX short/ BGU short pair has also been bringing in money for me nearly every day.  Still holding since Oct futures contango is also high.

Given Japan's decision to intervene in currency markets, other central banks with depressed economies may decide to compete to debase their own currencies, which will continue to be good for gold, which just hit new highs recently.  Gold to the moon!

Friday, August 27, 2010

TSLA option arb

I love risk-free money.  Because I can short TSLA in my interactivebrokers account, I shorted TSLA while buying the synthetic long with options (long calls and short puts with the same strike and expiration) to lock up .90 risk-free upon expiration of Sept options and 2.70 upon expiration of the Dec options all without using that much margin.  If TSLA becomes more widely shortable before then, the options should come back into parity and I can take my gains even sooner.

Wednesday, August 25, 2010

Several bearish factors weighing on market looking forward

The longer I trade, the less I'm willing to take longer-term views on the overall market (different concept from having the guts to go for big gains on individual trades), but aside from the economic data that's never been hot, which is all based off a downtrending housing market with plenty of inventory overhang still out there, there are a number of factors which indicate that we may have another pretty good equity downswing soon.

1)  The yen, a borrowed currency in the carry trade, is pushing highs.  It would be nice to see confirmation with the USD, the other major low-interest-rate currency higher, as well, but what can you do.
2)  Some technician has come up with this thing called the "Hindenburg Omen," which we've realized lately.  Look it up.  I'm not attaching a whole lot of weight to it, but it's another factor.  I believe that some technical indicators withstand the test of time.
3)  T-bonds are mad strong.  Coupled with strong gold, the market is confirming a deflationary theme, caused by an increased money supply overwhelmed with even more greatly diminished money velocity, bringing about decreasing prices, as in the US's first great depression.
4)  The absurd contango in VIX futures.
5)  Imminent bankruptcy by many governmental agencies and public pension funds.

The riskier bonds, for which I use LQD and HYG as proxies, aren't weak, which means they are not pointing to a collapse.  It would be nice to see the corporate bond spread widen a bit more as another sign of risk aversion, but you'll rarely have every factor lined up in advance of a major market move.

So how does this knowledge inform my trading?  I believe market crashes are things a trader can profit from best by waiting for the panic to start rolling first.  I'm not anticipating panic before it occurs, but I'm ready to jump aboard at the first signs of it.

After taking a bit of heat on the long Aug VIX, short Sept VIX trade, I substituted market puts once the Aug VIX expired and I've been making money virtually every day for the last week on my market neutral paired trade.  The VXX ETN's beginning to sell Sept VIX futures every day after Aug expiration day has probably helped.

Sunday, August 15, 2010


Pork prices are going to the moon

It'll be on my radar for good long or short entries going forward.

Wheat spread - Minneapolis against Chicago

Minneapolis wheat is generally higher quality than Chicago wheat, as reflected in the long-term spread in which Chicago normally trades at a discount.

Right now the Dec contract spread is bouncing off of fairly abnormal levels:

Looks like a good time to jump in and risk a little bit on the spread.  Always remember that spreads can get way more extreme than you can imagine.

Tuesday, August 10, 2010


IBM has been in a tight range for over half a year now, bringing the implied volatility on most of its options below 20%. It may be ready to pop higher any day now. I'm not bullish on the market overall, but IBM's fundamentals are solid and can make a nice low risk trade on the long side of your long/short book, should the stock continue wafting near the highs before breaking.

If/when IBM pops above 132.50 and 133, and especially if the stock can't break the recent lows around 128.50, I'll probably be looking to pick up Jan 2011 calls at ~140 strike, with IVs around 20%. Great risk/reward and great cheap time premium on calls that can be obtained possibly right when the stock starts a new upleg.

Switched out my SPY puts for a long Aug VIX

the difference between Aug and Sept VIX is now 4, meaning that my hedge mentioned in Uptrending Equity: Switched my short VIX over a month has suffered a bit. In order to reduce the time drain on the hedge and reduce my acct margin requirements, I swapped my market puts for a long Aug VIX, now that Aug VIX more or less matches the VIX index and the difference between Aug and Sept is so large. Once Aug expires I can always buy some puts again.

Difference btw commodities and other asset classes in selling the (good) news

So I reflected a bit more on the idea of "selling the news" in light of the limit up then limit down move in wheat. I hypothesize that selling the news is more often more effective in commodities than other asset classes in which all participants are speculators. This is because for commodities, there are hedgers whose primary concern is hedging inventory at prices better than what they were last at (in general suffering from bad trading psychology), regardless of news that may impact demand/supply further down the road. So if news is released that changes the demand/supply forecast down the road, speculators may react but be met w/ resistance from hedgers who don't yet care. When the juice runs out on the speculator-induced move, they are fighting each other for the best prices on the reversal. This phenomena isn't as present in other asset classes such as equities, where news is supposed to be quickly incorporated into everyone's forecast of the future, about which all market participants are concerned, thus limiting the resistance.

Just a thought.

Friday, August 6, 2010

Market's lessons in wheat

Wheat opened up a bit and quickly sold off. I took my small loss first thing in the morning, thankfully. Wheat provided a couple good intraday short setups and finished limit down. So while the limit up yesterday would have been more telling had it not come on news, my belief that the news was so significant that it couldn't price in a one-day limit up move proved completely wrong. That's the markets for ya. Either way, wheat is making big moves that agile traders should be loving right now.

Thursday, August 5, 2010

Wheat -785.75

As of the time of this writing, a massive bid came up to the limit up price in wheat (785.75). It should open up higher tomorrow, good chance it'll be limit up tomorrow.


I'm a little slow to start looking at it, but wheat is becoming quite active.

I'll be looking for great setups to be leaning on the long side for now. Graph of wheat and a measure of its contango:'W%201!')-('W%205!')&o=%3D('W%201!')&a=V:60&z=800x550&d=medium&b=bar&st=

Wednesday, August 4, 2010

LIA/PRS.MC arb no longer as sweet

Deal terms from what I posted about earlier at Uptrending Equity: Obscure merger arb have changed today to this:

I don't have time right now to figure out if there is any arb remaining under these terms. However, the price action of LIA would tell me to be out of at least the short LIA leg of the trade for now.

Thursday, July 29, 2010

Switched my short VIX over a month

As the market is selling off today, the premium of Aug VIX over the VIX index has narrowed to under 1 while the difference between Aug and Sept VIX futures remains at 3. So I've covered the short Aug VIX referred to in Uptrending Equity: Volatility arb and opened a new short in Sept VIX. I'm still hedged with puts, and I'm showing a small gain on the overall hedge.

Friday, July 23, 2010


A new inverse VIX ETN is coming out as posted about on VIX and More: XXV and the New VIX ETN Landscape and by Adam Warner at Too Err Is Blog-Human | Blog - Daily Options Report. Outside of roll-yield considerations, I disagree with their assessment that it might be a good long-term hold. This is due to one crucial detail regarding what Adam Warner considers to be the "index" by which the XXV performance is to be calculated. Mr. Warner seems to define the "index" as the performance of VXX, while I assume the "index" will be a more independent measure of VIX performance, without the rebalancing drag and management fee drag. So while Mr. Warner assumes that the relative underperformance of VXX over time will serve to enhance XXV's returns since XXV's performance will be calculated as the inverse of the index's, I believe that VXX's underperformance will not enhance XXV's returns at all.

I'm not saying that a strong contango in VIX futures won't help XXV's returns--it definitely still will. What I'm saying is that I believe XXV and VXX will both fluctuate around an ever-decreasing center of mass, due to rebalancing and fees, that will cause it to be a poor investment choice long term, like many other ETFs/ETNs. Again, to re-iterate, this is aside from roll yield considerations. Basically, over time, if you would like to buy XXV, the better choice will be to short VXX.

See my earlier post Uptrending Equity: Volatility arb to see how I'm profiting from the presently large VIX contango.

Thursday, July 22, 2010


Similar to the time soon after VMW's 2007 IPO when EMC's 87% stake in VMW was worth more than all of EMC's own market cap, VMW has again been climbing in value relative to EMC for the past half year.

My trading instincts tell me that the arb isn't wide-open enough to consider putting on a trade yet, as I prefer more ridiculous blown-out trades to begin reverting before entering, but something to keep an eye on.

I welcome comments regarding EMC's worth outside of its 80% stake in VMW.

BP distressed debt arb

I've been reading about BP's 1-year commercial paper yielding over 10%. I don't have access to a bloomberg or other real-time sources to check out what the prices were a few months ago but that sounds like at least a 50% price drop since pre-oil-spill to me (if someone has a graph of 1-year yields or CDS yields, please post it in comments). If it's paper is down 50%, then logically its equity should be down way more than 50%, right? But it's not, it's only down a little less than 50% since pre-oil-spill. So buy commercial paper (or buy bonds, or short CDSs), short BP equity, and you should make money no matter what happens to BP.

Scenario analysis of two possible extremes:

A) BP is just fine, doesn't pay out hardly anything in environmental suits (pretty much impossible right now). Commerical paper and equity both double back to where they were.
B) BP goes into bankruptcy and can't meet all creditors claims. Equity goes to 0 (actually, for as long as the equity trades, it would likely stay ever so slightly above 0 just b/c stocks simply don't trade down to 0 for as long as they exist, like FNM/FRE right now). Creditors aren't made completely whole, but get some fraction of par, probably a large fraction. Value of commercial paper stays way above 0 b/c a good-sized chunk of it is still paid out.

So as long as you are long fixed income in slightly larger size than you are short equity, you should make out well. However, I would personally tilt the hedge a little more heavily on the short side, as I don't see BP coming back much higher for years at least.

This arb is probably possible because a whole bunch of funds were forced to dump BP's debt at the time it was downgraded, no matter what fair value should be, while equityholders were not forced into such a firesale.

Obscure merger arb

Disclaimer: At the time I last did this analysis, PRS.MC was priced at 1.81 euros, so the evaluations below are made w/ that input. Adjust accordingly for the current market price of PRS.MC.

Short LIA, long PRS.MC, and also get long EUR.USD (=USD/EUR) if you want to hedge currency risk of the trade (as an independent trade, I wouldn't considering going long USD/EUR prudent at this time, as a trendfollowing system, which works over time, would dictate a short position at this time). PRS.MC details here:

Here's the rationale:

LIA is a blank check company. They have a bunch of cash sitting around waiting for the management buyout "pros" to do something with it. They've finally decided to blow it on something. Here's the deal:

On p. 9 of the presentation, you will see that every share of LIA will get 1.173 shares of ordinary PRS.MC, and .563 shares of the NVCS of Prisa.

The 1.173 shares of ordinary Prisa is easy enough to value-> (1.173 shares)*(1.81 Euros/sh)*(1.196 USD/EUR) = around $2.54 USD.

The terms for the NVCS shares are listed on p. 3 of the presentation. It's a little messy, but it looks like for each NVCS, you get a 7% of 7.331 Euros annual dividend for 5 years, and after 5 years, the NVCS will likely be redeemed for ordinary PRS.MC shares at a conversion rate that decreases if more dividends have been paid. If no dividends are paid, the 7.331 "stated value" is retained till the conversion time, and you would basically get almost 2 ordinary PRS.MC shares per NVCS at that time. Essentially, the more dividends are paid, the lower the "stated value" that remains in the NVCS, and the fewer ordinary shares of PRS.MC you'd get when the NVCS is finally converted. Also, Prisa retains the right to choose whether the issue a dividend, thereby decreasing the "stated value," or retaining the "state value" of the NVCS, so Prisa can game the choice to its advantage depending on the price of ordinary PRS.MC shares. This Prisa option decreases the value of an NVCS to the investor from what it would be without the option. With a lower value of PRS.MC shares, Prisa will withhold dividends. In the end, assuming no dividends are issued and the "stated value" of the NVCS remains intact until the end, then you will get almost 2 PRS.MC shares per NVCS. The math they used to calculate the "target value per Liberty share," given their assumptions about the current price of a PRS.MC share and the exchange rate assumption, supports this interpretation.

Problem is, the price of a PRS.MC share has dropped from the assumed price of the presentation, and the EUR/USD exchange rate has dropped as well.

Now you get $2.54 worth of ordinary shares and .563 shares of an NVCS worth 2*.563*1.81 Euros*1.196 USD/EUR = a total of $5.08 of PRS.MC stock for each share of LIA.

Your catalyst for convergence will obviously be when the LIA is actually converted to those other shares, if it doesn't drop in price before then. LIA is currently priced at almost $10. The stock is reasonably thick, so you could probably short at least 100K shares while still being able to get out of all of them fairly easily should something unforseen occur.

I typically dislike merger arb, but in this case, whether the deal goes through or not, the risk of a price increase in LIA is diminished. It was overpriced before it decided to blow its money buying this thing. If you look at the record for blank check companies (SPACs) in general, it's terrible. LIA got on my radar originally for being priced at a steep premium to NAV (basically cash). If the acquisition doesn't proceed, then nothing much should happen to LIA's price.


I've been long BANR for the last couple weeks or so since the stock issuance and massive insider buying at $2, followed by a slight move up out of the 1.90-2.10 area. If you aren't long already, this may be a good spot to pick it up around 2 without risking much. I was hoping for a nice sector short squeeze in regional banks to help my position, as occurred in Jan and Apr of this year, but the mini-sector-squeeze fizzled out pretty quickly this time. However, I'm still following my plan on holding BANR for a big move.

Volatility arb

There is a large contango in VIX futures. I'm arbing it by shorting Aug VIX and buying Sept SPY puts (since the Aug VIX is supposed to reflect the IVs of Sept options) at various strikes w/ IVs at around 22-24%. Over next week or 2, assuming the market doesn't move, Aug VIX should converge down to VIX index, while IVs on SPY options increase as they near expiration. If market moves up or down, the two sides of the pair offset each other. In fact, on the face of it, it appears that the net paired trade is long gamma, meaning that the pair together makes money the further the market moves away from the original price upon entry, assuming both sides of the trade were delta-hedged at the beginning (you will have to come up with an approximation for the delta of Aug VIX). This may lead one to want to sell calls on VIX instead of outright shorting it if you want to neutralize gamma. However, a short VIX position itself may be slightly negative gamma already, as there's a built-in floor to VIX as the market moves up, while VIX can scream much higher as the market falters. Thus, I think an outright short on VIX is adequate.

Alternatively, you short the VXX ETN, which is comprised of both Aug and Sept VIX futures, and buy corresponding weights of Sept and Oct SPY puts. As of July 22, the VXX fund has mostly Aug futures and is dumping some every day to buy Sept futures. In fact, this may be preferable, as people are always trying to front-run these cumbersome ETFs/ETNs.