One thing I like to scan for is what stocks and indexes are hitting 52 week IV lows. Today, I was surprized to see the RUT on that list. The RVX (the VIX of RUT) touched a 52 week low today. While that on its own is not that interesting, the fact that the VIX is over 2 points above its 52 week low is certainly interesting and might be informative. Take a look at the returns for the VIX and RVX over the last year:
The VIX settled a touch below 13.70% today. Its lowest settle since early December. The VIX futures on the other hand are no where near that level. Take a look at the curve as its stands now. Notice the GAPING whole between cash and VXH5
There are all sorts of patterns that are ugly for stock charts, but many do not know that there is bearish stock indicators that are derived from volatility. One that is particularly bearish is the combination of sinking volatiltiy and a sinking stock at the same time. This is developing in BABA
It looks like the Greek Drama happening overseas ended up being a comedy more than a tragedy. That is good for investors and good for the Greeks. We will revisit the issue in June but for now that looks like the only thing that was holding up implied volatility.
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I don’t know what the rally was from, a pop in oil, AAPL to the moon or a de-escalation in the Ukraine but a rally we had. Stocks fallen into a pattern of rally and retreat and today was no different. The last downturn was a mix of Greek elections and 10% of the market cap of the SPX going into the ash can with oil. Tech is leading now and the market loves tech leadership. NDX 5000, a sop to swinging 90’s is now a realistic target.
At any given time, over 50% of all options are overpriced. This is why most traders like selling premium. At the same time another 20-30 are typically fairly priced with another 20-30% being underpriced. This means that while it is likely that an option is overpriced, its not always the case. Take AAPL for instance. Take a look at how the underlying has been moving relative to the price of its overall options: