This was a strange day in the market when stocks really lacked a sense of direction. For the most part the tone was down and VIX was up slightly but the volatility futures actually finished down on the day into the close. There was really a lack of interest more than anything else as the race to NASDAQ 5000 left everyone with an empty feeling.
VIX is having bouts of self-doubt about halfway through the day the last couple of days. The 13 handle is acting like kryptonite which repels all VIX declines. The SPX is in such lofty territory that any pullback is taken as a sign of worry.
One thing I like to scan for is what stocks and indexes are hitting 52 week IV lows. Today, I was surprized to see the RUT on that list. The RVX (the VIX of RUT) touched a 52 week low today. While that on its own is not that interesting, the fact that the VIX is over 2 points above its 52 week low is certainly interesting and might be informative. Take a look at the returns for the VIX and RVX over the last year:
The VIX settled a touch below 13.70% today. Its lowest settle since early December. The VIX futures on the other hand are no where near that level. Take a look at the curve as its stands now. Notice the GAPING whole between cash and VXH5
There are all sorts of patterns that are ugly for stock charts, but many do not know that there is bearish stock indicators that are derived from volatility. One that is particularly bearish is the combination of sinking volatiltiy and a sinking stock at the same time. This is developing in BABA
It looks like the Greek Drama happening overseas ended up being a comedy more than a tragedy. That is good for investors and good for the Greeks. We will revisit the issue in June but for now that looks like the only thing that was holding up implied volatility.
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Creating Income with Options
Mark Sebastian, founder of Option Pit, will "pull back the curtain" and reveal everything you need to know about how to analyze an options price and whether it's a 'buy or a sale'