Option Traders, as we talked about on Monday, traders are trying to price out the weekend as quickly as possible. Don't believe me, take a look at the VIX chart below (this is the end of yesterday and all of today in 5 Minute Intervals):
Notice that despite closing near its lows the market sees a severe drop in implied volatility near the end of the day yesterday. Then as we opened somewhat flat today, there was an AGGRESSIVE amount of at the money premium selling today. This is what caused the VIX to drop almost 2 points despite the SPX being down big.
Traders, I am pointing out to my option mentoring students that any advantage to selling ahead of the holiday is now gone. Do not expect to collect any 'accelerated decay' between now and a week from Monday. There may be a chance to go after Christmas and New Years decay, but that will not happen until the December retail numbers are released at the beginning of the month. In fact, if you look, it appears they went a little too far as the VIX rallied near day’s ends. Probably some buyers of 'cheap premium' coming in, it is entirely possible that IV’s go up slightly over the next few days as premium fails to suck out. It appears the volatility Turkey is stuffed, deep fried and ready to serve.
I’ll be Las Vegas at the Trader's Expo if you are going to be there, give me a call, I’d be happy to meet up and talk on Thursday, Friday, or Saturday morning! (888) Trade-01
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Graph from TOS
