Hedge funds are shorting the VIX again at a near record level. Don't forget what happened last time they did this. It was October 2017.
Non-commercials, who are now at the other extreme, continue to bet that volatility remains suppressed. Last week, they added 7.8k week-over-week to take their net shorts to 177,754 contracts – a new record (Chart 4). The prior high was recorded in October 2017. When stocks began to sharply correct in January-February and October-December last year, these traders’ net shorts were much lower. This is a dynamic equity bulls should not take their eyes off of.
Just because VIX net shorts are at a new record, stocks do not have to begin to correct right here and now. But with each tick higher, risks of unwinding rise. This suggests a surge in the cash is a matter of when, not if. SOURCE: hedgopia.com