No Weekend decay today

Stocks made a little rally today on the good economic news in the morning.  Much of the early gains went away as the day wore on.  For what seems like the 5th time this week, the VIX cannot hold the lows of the day into the close.  As I write this, with 30 minutes to go today, the sub-14 VIX came and went with the slow deterioration of sentiment.

Where did it come from?  To keep with the story of the last couple weeks, the OTM puts continue to attract the attention of premium buyers.  Maybe the Russian’s massing on the boarder has something to do with it but there is still a bid for OTM IV going into the weekend.

 

3D charts by OptionVision

The one thing about buying juice on a Friday without a mark down is that it is near certain to suffer two days of decay.  That might not mean much if the Russians decide to bite off a bigger chunk of Eastern Ukraine.  Even so, market for volatility is giving it some respect.  It is not a bad idea.

The Trade

I think a decent weekend trade would be a VIX strangle.  Buy a 16/21 call spread and a 15 put in the Apr cycle.  Try to get the package for $1.30 or so.  If nothing happens and the Russians go away, 13 VIX will be possible as the skew melts away leaving the Strangle nicely in the money.  If they march in, the call spread will be an easy close to finance the whole thing plus some.

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