AAPL had earnings, and whether you thought it was going up or down there is one thing that seemed off, vol was low into earnings. The AAPL straddle was prcing in a move slightly over 4$. That seemed low to us at option pit. Well...we were right take a look at where the 104/105 strangle went out that expires NOT just this Friday, but on Friday May 27th. The straddle was about 60% too cheap or more.
We have made a few comments over the last few weeks that the VIX curve was out of whack as the cash index has traded at a steep discount to the futures contracts. We noted that we though a spread of about 2 points was justified based on tthe current VIX level and the days to expiry in the futures. Today, with the small sell off and the weekend effect, we saw the VIX futures essentially unchanged, while the VIX cash picked up .86. Consider the curve normalized