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A Fork in the Road

The market started off this morning with a small rally in the indexes and a small sell off in the volatility products.  At one point I had the VIX down to just under 15 but it closed at 16.14 so the intraday swing in volatility was pretty solid.  For this last week the realized volatility of the SPX clocked in around 8%+ on the 10 Day realized.  I just finished doing the Vol Views show on the Option Insider Radio Network and Don Schlesinger suggested that with realized volatility so low it is hard to believe it can stay down here.

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Bidding for the Banks

Today we had the rally that never was.  On the face of it, the US keeps getting glimmers of good news (jobs), and the Europeans keep getting bad ones (Spain downgraded).  What does get the market going is hope of central bank intervention.  Spain gets downgraded, and they will have to go to the ECB and then the crisis is solved, or that is how the market sees it.  How do the banks see it?  After all, they have vested interest in the flow of money in the US and abroad?

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The VIX down and the market did what…..

One of the most interesting things about market sentiment is how strange it is.  After nearly a year of hanging on the hopes and aspirations of the Greek peninsula the market has forgotten what to do with good old fashioned news.  The Beige Book was on the whole positive.  Earnings reports on balance for some retailers were a little better than expected.  The market looked at the news and went south.  Good news can’t get us to rally so things are back to normal.  Hmm…. So what is up?

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Oil IV is Too Cheap

Bloomberg asked me to talk commodities today.  While not my strong point, I know enough about grains and oil to have a decent discussion with about anyone.  However, today was easy.  Here is why:

When I was on the train coming into work, I was thinking to myself that OVX and its sister CVF have both had a bit of a rally.  I was going to talk about how expensive options were getting in WTI and in USO.  Then I sat down and looked at the actual vols close up.  For starters, USO IV is not that high.  

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AAPL IV Now Higher than Earnings and Product Launch

Many of my option mentoring students LOVE AAPL.  AAPL might be heading for some real problems here in the near term.  If not problems, at least some serious volatility.  How can I tell?  While some traders will point toward the stock breaking its 50 day and 100 day moving averages,  I would point toward something else,  volatility.  Since AAPL stopped whipping around in the spring and bottoming out in May, the stock has had two major characteristics:

1.  The stock has almost moved in a straight line higher

2.  The Option Volatility has been relatively low

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Trading vs. Investing Using Options HPQ Revisited

The jobs market can breathe a sigh of relief today knowing that the unemployment rate dropped .3 of a percent  to 7.8%.  I am trying to remember the last time the percentage drop was that big, but it was quite an achievement considering the jobs numbers have been pretty anemic for months.  For sure it has not happened in the last year (see my chart).  My only guess is the employers were relieved that the Euro Crisis was solved and got hiring.  I hope this is the start of a great trend, but of course, we will have to wait f

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FXE November Vol Is Cheap

I will be honest,  I do not spend a lot of time dealing in currency options.  For starters, the futures options do not have that much liquidity.  This is because most of the volume is traded over the counter.  The FXE currency pays a wierd dividend and has a management fee.  It also is not the most liquid product; although, the front months do trade.  However, when something gets out of whack, no matter the product, one should trade it.

Take a look at the term structure for FXE:

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Is HPQ toast?

The market spent most of the day trying to decide if the ADP payroll report was going to be a good or bad precursor for the NFP number on Friday.  I could almost see the tug-of-war going on between the yes and no camps all day long.  One stock where the future was not in doubt was Hewlett Packard (HPQ ).  The market hated it, and the name was down 13+%.

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An AAPL Anomaly Just in Time for Earnings

Wel,l we had a snoozer of a day just when the market thought it could catch a bid.  The only thing that really got sold was the VIX.  It pitched over the cliff to trade 15.71 by the end of the day.  The seesaw around NFP on Friday begins.  Since Bernanke can’t do a QE4 less than a month after QE3, the market seems to be reassessing the kind of move we can make.  A decent report will give things a boost no doubt.

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VIX pointing Toward A Breakout

While I continue to be a bit of a bull, there is something lining up that will at least keep me in cash or less short vol over the next few days.  The SPX has done NOHTING over the last few weeks.  Realized volatility is in the toilet at well below 10% over the last 10 days and right at 10% over the last 30 days.

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Livevol (R) www.livevol.com

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