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VIX Realized Vol about as Low As It Gets

I spent a little time looking at VIX vol today.  I have to say, it is about as low as it gets...but could go even lower.  Take a look at how much HV has plumpted in VIX over the last few weeks.  But, taking a look at 30 DAY HV,  it is possible things could get worse.

Chart - ^VIX - CBOE Volatility Index_window_screenshot_4.png

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MBLY could be TWTR redux

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NFP sucked.  The numbers were not great, but surprise, surprise the SPX ended the day up near another record.  The law, in case traders have not been paying attention, is that low interest rates have been good for stocks.  The ECB is lowering rates so that must be good for US stocks.  Ok, anything that happens is good for equities.  The bears might be right eventually if there is anything left of their PA’s when we finally crash.

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When GS Vol Breaks 15%, Its a Buy

We watch IV's of the SPX and many of its securities like a hawk.  Our goal is to try to find patterns that emerge in the volatiltiy markets that can potentially make money.  One that we have noticed internally and began to trade off of, in the strategy letter, is Goldman Sachs.  Traders have a bad habbit of overselling the premiums coming out of events and after big moves.  This is almost always a mistake.  Take a look at the pattern of GS when the IV drops below 15%.

GS.JPG

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Beware despots sending in aid

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It is funny I thought the Russians sending in aid a couple of weeks ago was a bit of a smoke screen.  Somehow the Ukrainian rebels got a new leg up.  The situation for them has gotten better since the white “humanitarian aid” trucks went in.  Fast forward to today.

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Near Term HV at a Bottom

As we all know,  vol can go anywhere, but is unlikely to stay there.  While HV can touch into the low single digits for short periods of time, it doesn't stay there long.  Take a look at a 2 year chart of 10 day HV and 30 day IV

Chart - ^SPX - S&P 500 Index RTH_window_screenshot_0.png

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Notice that while IV is not at its lows, HV is in fact touching the lowest levels in two years. This would point toward one of two things

1.  HV has to rally

2.  IV has to implode

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Is there a second take in TTWO?

Stocks are going to make a closing high today or near it as I write this post and I can’t help but think we would be way higher if Vladimir Putin could make up his mind what he wants to do in the Ukraine.  We know what he wants to do, take a bunch of territory, but the Europeans are still threatening sanctions.  That is keeping the VIX into another elevated close and vol. futures bid.

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YHOO getting antsy for the BABA IPO

After the record run to all-time highs stocks are stuck today while the violence in the Ukraine continues.  We have highlighted the 5% realized vol in the SPX and will not rehash that but stocks are setting up to go somewhere.  A name that has been setting up to go somewhere is YHOO.

The stake in BABA has really driven the value in YHOO’s shares recently and the name has been in a range from $33 to $38.  It is now at a 3  month high as BABA just released a decent earnings report as it sets to IPO.

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Our Founder on Bloomberg TV Talking AAPL and RL

Our Founder Mark Sebastian was on Bloomberg TV from the CBOE talking SPX, VIX, AAPL and RL
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Will the low realized volatility stay with us forever?

I like working at Option Pit with Mark Sebastian and I like our clients.  Well one it is fun, most of time, and we have great clients.   From time to time we get some solid observations from them.  That is another thing I like.  Having a different perspective from traders you have helped educate usually means some interesting stuff know the foundation is solid.  So I am giving one of our clients some props here for this one.  He  knows who he is.

Note that when realized volatility dips below 5% on a short term basis it usually does not stay there for too long.  I have 10 day RV down around 5.41%.  Right now the first 3 Weekly terms in the SPX are all below 9%.

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14.50? Really???

I understand there is a major difference between straddle price and actual movement, because most pricing models assume dynamic hedging.   The SPX is now 2000.00,  does anyone see the disconnect in the weekly straddle price?  Take a look at this trade ticket:

^SPX Complex Order Ticket_window_screenshot_0.png

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