Blog

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 cares.  I will make a bold prediction and say we make an all-time high within a week.  I am not here to make a bullish case but some stocks that have been nowh

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) www.livevol.com

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

Livevol (R) www.livevol.com

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.

Today, the VIX settled 12.25, while the VIX future settled 13.20, a premium of near a full point.  This is a premium to cash of closer to 10% than 5%.  In fact, the enter curve is trading at huge percentage premiums relative to the norm.  You can see the two curves next to each other below.

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.

The VIX closed at a 6 year low today, trading near 11.56 on the close.  

 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 return for 2012 but averaged out it was not that much.  2013 is giving things a kick but stocks are at nothing like crazy valuations.  The big question is can growth ha

Our COO was on Bloomberg TV discussing BA option trading ahead of an upcoming NTSB decision on the 787 Battery.  You can watch the video here:

Boeing continues to rally ahead of an important NTSB decision on the safety of its battery system within its new 787 Dreamliner, but why? Considering BA is nearing an all-time high, it seems likely the market has already “baked in” the idea that the NTSB will eventually approve the system. 

The entire Consumer Cyclical sector is killing right now.  PG, CL, CLX and KMB are all at or near all-time high stock prices.  The industry is doing great as a whole; KMB in particular has had a great run higher.  Yet, something a little screwy is happening with Option IV in KMB.  Take a look at the 30 day IV from LiveVolPro of CL, CLX, KMB, and PG.  KMB is the green line:

Livevol (R) www.livevol.com

Today is a clear example of times where the VIX is misleading.  Yes, the VIX is down today, but that does not mean that IV is necessarily lower.  We are going to look at a chart of SPY options from Option Vision.  When IV is up on a strike, the strike will turn green.  When IV is down the strike will turn red.  The deeper the color, the more IV is moving.  Take a look at the color that SPY options are turning today.

One of the interesting things to watch, that I think shows how jittery this market is, despite the rally, is the actual volatility of the VIX.  Over the last 10 days, the Vol of VIX (not VVIX) has been near 220%.  

The market had a bit of a reversal on Thursday for what reason I cannot quite figure out.  Maybe politics but the economic news all week has been ok. Today there is the big shrug on the Sequester so maybe the politics will start to seep out of the market. One could hope. One name that took off on the close yesterday was Facebook (FB).  FB spent most of the day in the mid-26 level only to ignite on the close to close 27.25.  It was like all the sellers went home after the whatever deal was announced with MSFT.  What it left at the end of the day was a really flat term structure.