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VIX Is Really Expensive

Today, while the S&P was mostly unchanged, the VIX was up more than .80.  When taking into account for weekend effect a little better than unchanged.  Yet in many respects it should have been absolutely destroyed by the market.  Why?  Well take a look at where movement has been, in and out of meetings, in and out of economic announcements, and wars.  Yet for some reason this Fed meeting is being treated as if there is some fundamental change occuring.  Take a look at the HV/IV spread:

Chart - ^SPX - Standard & Poors 500 Index_window_screenshot_3.png

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Our COO Discussing Short Squeezes on Fox Business

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And One More Thing VXAPL About to get Crushed

The news is out  Apple is going to have the I-Phone 6 AND the I-Phone 6 PLUS!!! Plus  APPLE PAY and the I-Watch.  Based on what the stock did,  the market acted to the AAPL conference much like McKayla Maroney would to a Silver Medal.  With that the VXAPL got smoked.  Even more so, the VIX options expiring this week and next week took it in the chin.  That being said, it appears the market is still holding out hope for some more movement here is a chart of VXAPL:

vxapl_0.png

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VIX Realized Vol about as Low As It Gets

I spent a little time looking at VIX vol today.  I have to say, it is about as low as it gets...but could go even lower.  Take a look at how much HV has plumpted in VIX over the last few weeks.  But, taking a look at 30 DAY HV,  it is possible things could get worse.

Chart - ^VIX - CBOE Volatility Index_window_screenshot_4.png

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MBLY could be TWTR redux

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NFP sucked.  The numbers were not great, but surprise, surprise the SPX ended the day up near another record.  The law, in case traders have not been paying attention, is that low interest rates have been good for stocks.  The ECB is lowering rates so that must be good for US stocks.  Ok, anything that happens is good for equities.  The bears might be right eventually if there is anything left of their PA’s when we finally crash.

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When GS Vol Breaks 15%, Its a Buy

We watch IV's of the SPX and many of its securities like a hawk.  Our goal is to try to find patterns that emerge in the volatiltiy markets that can potentially make money.  One that we have noticed internally and began to trade off of, in the strategy letter, is Goldman Sachs.  Traders have a bad habbit of overselling the premiums coming out of events and after big moves.  This is almost always a mistake.  Take a look at the pattern of GS when the IV drops below 15%.

GS.JPG

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Beware despots sending in aid

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It is funny I thought the Russians sending in aid a couple of weeks ago was a bit of a smoke screen.  Somehow the Ukrainian rebels got a new leg up.  The situation for them has gotten better since the white “humanitarian aid” trucks went in.  Fast forward to today.

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Near Term HV at a Bottom

As we all know,  vol can go anywhere, but is unlikely to stay there.  While HV can touch into the low single digits for short periods of time, it doesn't stay there long.  Take a look at a 2 year chart of 10 day HV and 30 day IV

Chart - ^SPX - S&P 500 Index RTH_window_screenshot_0.png

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Notice that while IV is not at its lows, HV is in fact touching the lowest levels in two years. This would point toward one of two things

1.  HV has to rally

2.  IV has to implode

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Is there a second take in TTWO?

Stocks are going to make a closing high today or near it as I write this post and I can’t help but think we would be way higher if Vladimir Putin could make up his mind what he wants to do in the Ukraine.  We know what he wants to do, take a bunch of territory, but the Europeans are still threatening sanctions.  That is keeping the VIX into another elevated close and vol. futures bid.

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