Whille the VIX certainly had a rough day selling off to 12.60. I think the more interesting story is the Russell 2000. Today, the RVX touched a 52 weekly low and is near 2 year low. One can see how cheap its gotten, trading below 15 for only the 2nd time this year.
Today as I was examining the VIX curve I thought I would take the time to look at where things were last month. Take a look at the curve from May 20th vs Today. The two cruves look almost identical:
Yet we have another FOMC announcement with the Fed choosing to do nothing. I don’t know how far the economy has to grow before rates start to normalize but we have to be getting close now. We had the 90’s and a government surplus and higher rates and no one was complaining. Once again post-meeting the VIX dropped even with near sure 25 basis point rises in 2015 mapped out.
Seeing news reports on TWTR about AMZN using couriers to deliver packages gave me the UBER kind of feeling. UBER is on its way to becoming one of the highest valued pre-IPO companies on the planet and it makes some sense AMZN is taking a page from its playbook. That got me looking to AMZN volatility and it is very cheap.
The euphoria of Thursday is now over. The rally we had on concessions from Greece now give way to the fact that the Syriza party is running for its next election realizing it cannot deliver on any promises besides sending Greece into the economic stone age. Volatility traders love this because it is, well, some volatility to trade. Volatility wants to move, but only at the pace of a 3 legged race. The will to move out is not there yet.
I toss that out there of course and I don’t mean VIX. What I do mean is the ATM volatility for the SPX. With the Greece deal on and off again the one thing that has been consistent over the last two days is the total immolation in implied volatility. The 9 handle for SPX ATM IV is a tough barrier to break because it means traders are actively hitting option bids on the downside to drive the ATM lower. We are almost there.
On Monday we discussed how VIX futures were not buying into what the VIX cash was dealing. We called it scared and complacent at the same time. Today we appear to be hear to discuss how, yet again, VIX futures traders were right and SPX put option buyers were wrong. It amazing, this time two days ago VIX cash was at a premium to June. 2 days later, a .60 discount. If in a situation between VIX and VIX futures most of the time the futures traders are right.
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We have another lackluster session today with no good news coming out of the EU on the Greece subject. For now that is the millstone around the market’s neck with things just dragging. Besides NFLX up, stocks cannot put in any kind of sustained rally. Bonds are getting trashed too in the face of QE out of the European Central Bank.