Visual Proof Of VXX Futility

One of the mistakes that sends many traders to our option mentoring is the trading of VXX.  Shockingly there are traders that think this ETN should perform the way the VIX performs.  This is clearly NOT the case.  Today the VIX closed 14.39 up 1.03%, the VXX on the other hand closed unchanged to 21.58.  VIX is up a touch less than a point from the open on Monday.  VXX is actually DOWN from that open on Monday. We can actually see the differences in a visual tick by tick chart of VIX and VXX.

Here is a chart of the VIX over the last 2 days

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Does the end of day VXX rally portend doom?

The Europeans with the anti-weekend effect can be counted on for some serious drama.  Depositors in banks in Cyprus were slapped with a tax in an attempt for rest of the EU to grab some money back for bailouts.  These happen to be institutions with large cash deposits so they are a different flavor than the continental banks but the randomness of the act frightened investors more than anything.  Then to make it worse (almost) they are re evalating by mid morning.

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Option Pit's Annual Tournament Pick'em Contest

It's back and better than ever.  The Option Pit Mentoring Tournament Pick'em Contest!

We are using Fibonacci Scoring with a seed differential multiplier.


First Place:  $1,000.00 Option Pit Credit

Second Place: $500.00 Option Pit Credit

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Is “The Sheik” back in the SPX?

As I write this the market is on its way to breaking the 10 day winning streak in the Dow.  We never got into green territory today but the market needed to take a deep breath and survey the landscape and see what is up.  The numbers that came out were not great as consumer confidence and manufacturing expansion was muted.  Does that mean the great bull market of 2013 is over?  I don’t think so and there is a large customer in the /ES options that does not think so either.

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The Weekend Effect is in Effect for the VIX

Not long ago the SPX was sitting around 1350 right after the President got elected.  Now we sit 2 handles from an all-time high in the big index.  For those who bought the top in 2000 and 2007 you are looking sweet right now.  Reinvest those dividends and you still did better than a CD although the gray hair in the process probably counts for something.  And where is the public in all this?  Nowhere, that is where.  Liquidity is paltry by the standards of the retail investor.  A few are out there but besides the big financial news outlets no one really care

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GLD Vol Also In the Toilet

While the big news around Option Pit Mentoring is the VIX closing below 12 again, SPX is not the only major product with IV in the toilet.  GLD IV is getting crazy cheap.  The GVZ is trading at 6 months lows and near all time lows.  


Livevol (R)

If we look at actual GLD vol over the last 10 and 20 days, it actually looks somewhat fairly priced.

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VIX Curve is Steep

One of the things most options traders watch is what the VIX curve looks like.  It's not just the overall shape that matters, it's how steep the curve is, much like skew.  Last month at this time, the VIX was trading at 13.7.  The Feb future was trading 14.35, a premium of about 5% to VIX cash.  This is about normal, and points toward a market that is somewhat efficient and comfortable with VIX levels.  The VIX futures ended up settling 13.07.

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Like the SPX? Buy Calls, Hate it? Buy Puts

On Friday's I host a podcast called Volatility Views with the great Don Schlesinger.  He has many great sayings, but perhaps his best is:  "There are options that should be sold, and options that should not be sold."  Right now, I think Don would clearly say now is not the time to sell options.  The SPX is right near its all time high, not fundamentally important.  But what is important is where IV's and HV's are currently trading.

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Buy the rumor and sell the news, well not always....

 i don’t quite know what happened between last Monday and today but someone with a big bottle of happy pills was doling them out like candy from a Pez dispenser.  The Sequester is no problem, Italy has no choice but to follow the path, Draghi won’t lower rates and Uncle Ben won’t raise them and just like that the Dow is at an all-time high.  I am of the mind that the equity markets have had mostly lower valuations for a while based on the fact that the economy cannot grow.  There were 0 returns in 2011 and a nice ret

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