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AAPL IV Getting Cheap Again

Since we left the trading floor and entered the options education busines,s we have learned a few important things:

1.   Retail traders really like to trade apple options

 2.  When VXAPL (the VIX of AAPL) gets below 30, it is not going much lower.  When it gets near 25, it’s the scoop of the year.

Take look at where VXAPL it is getting pretty cheap and is starting to look like a pretty decent buy. 

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How VIX Can Stay Flat on a Rally

We have dedicated several blogs to educating our option traders on how the VIX tricks the trader.  We saw this again today.  While the VIX ended up slightly down on the day, by no means was volatility down.  Again, getting more granular and looking at strike prices, we can see that IV was infact up.

Here are the 1320 and 1335 strike prices, yesterday's and today's ATM contracts.

1320

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1335

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The Volatility Blip in Facebook

I figure, by the time Congress tells Wall Street how to price IPO’s because of the Facebook slide, the name will already be trading $40.  Then, of course, the whole conversation will be moot.  It is one of the rare funnies on CSPAN to catch that kind of testimony.  I can just picture the questions now, “How come you did not charge less for the IPO, the customers would have been happier?”  Not the investment bank customers, mind you, but FB is starting to heat up again as is the way with names that have hyper growth potential.

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Sometimes the VXX feels like a mouse on a wheel

My kids just got some mice for pets.   This is the entry level for us in pet world.  Take care of the mice and you might get a dog.  The problem with the mice is they run on this little wheel for what seems like 20 hours a day.  Squeak, Squeak goes the wheel morning, noon and night.  It must be the penance for me doing the Option Insider Radio when Longo tells me to de-squeak my chair since it ruins the mellifluous sounds of this voice.  I digress here, but things lately are on some kind of daisy wheel with no real breakout one way or the other.  Let’s see how the market prices that.

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Understanding the VIX in Relation to SPX

One of the first things I teach my options mentoring students, on their way toward a great options education, is to understand how to understand the relative value of VIX.  VIX is not a standalone product; it is a derivative of SPX.  Thus, if one wants to properly read VIX, one must take it in relation to how the SPX is moving.  

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A nice selloff on the way to the rally….

 It must be nice to be Goldman.  Look for a 5% decline and get half of it in one day.  There is a reason why they are good.  No doubt the lack of market liquidity had something to do with it.  Also, the big banks are about to get downgraded by Moody’s.   It does defy my imagination that the ratings agencies were nowhere in 2007 and are now popping up everywhere in 2012, when the banks have cash they cannot lend and balance sheets marked at the bottom of the housing cycle. And they get payed for that.  Too funny.   Let’s look at how the market rated the selloff today.

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VIX Primed to Keep Falling

Option Traders, despite the slight drop in the market, the VIX took a nice dive today, mostly on the heels of a so-so fed announcement.  You can listen to me talking about the Fed's affect on the market during today's "After the Bell" on FOX Business News from 6/20 below:

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Options Education: JBL Long Calendar as Seen on Bloomberg TV

Today, on Bloomberg TV's 3 vs Trish our COO and lead option educator Mark Sebastian discussed an earnings play on Jabil Circut.  The trade market discussed was a long calendar spread for .30:

 

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SPX IV finally collapses

Fresh from my trip to Chicago, meeting some of the excellent Option Pit clients and watching the Cubbies always puts me in a good mood.  We went in for some old style mock trading sessions, and, by and large, they were well received.  One of my favorite parts, as Mark and I were bidding the volatility in FB on our white board, was that a client asked a great question, “What do you do when paper keeps bidding up the volatility?”  This is what I used to ask myself all the time.  When the IV moves what to do?  We got the little mock crowd short some juice for 5 minutes just to drink in the imp

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