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Option Markets Not Buying this Rally

If this was the end of the sell off,  Option Markets were not buying into it.  The VIX spent the entire day under performing the S&P;  on a day where the S&P is up 1.1-1.3%  I would have expected VIX to be down at least 2 points.  To make matters even worse,  what little performance there was in VIX on the day completely evaporated in the final 15 mintues as the VIX completely popped.

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This time the Fed ain’t saving you

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The Fed is continuing the modest tapering of bond purchases and thankfully ignoring the machinations in Turkey and Argentina. A stronger statement of course would be that they taper 20 billion instead of 10 billion.  There were some hopes that maybe with stocks lower that they would ride to the rescue.  That did not happen.

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Volatility Trends in Sell Offs

In the last year there have a been a few of these market sell offs.  In those sell offs there have been a few things we see in common:

1.  They typically have a second leg up

2.  They stall out around the 50 day moving average

3.  They have been buying opportunities

4.  Realized volatility quickly subsides

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However, there are a few small differences between this move and the others over the last year namely:

1. The magnitude of the moves:  intra and inter day vol has been high and Friday's sell off was the biggest in about 2 years.

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VIX Futures Starting to Buy In

Despite the ugly sell off on Friday, it was not until today that I 'bought in' that this market might be ugly for a few days.  Why?  Because of VIX futures.  When the VIX cash goes over VIX futures its not usually a big story.  While with cash going over with about 25 days to expiration is a little more rare, it is still not much of a big deal.  However, when the futures start to trade in contango, that is almost always a bad sign.  Today,  Feb and March flipped and Feb traded at a premium to March for a while.  Take a look at a 30 minute chart of the relationship between the two months over the last weeks

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VIX Move About Right, Justified

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Bond volatility is still cheap but the HV is not

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Argentina devalued the peso today along with China providing less than stellar manufacturing data.  It all added up to a mad dash for Treasuries and other safe havens like the Euro.  What a difference a year makes.   It was not too long ago that the run to above 3% in T-bills was a sure thing.  At least, over the last few weeks coming into 2014 that is not the case.

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Is the retail sector for sale?

 

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The day the IV stopped

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Bond Volatility is in the Toilet

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With the most recent rally in the 10 year back to yields near 2.90, traders have taken this opportunity to completely dump options.  The VXTYN is near its lows,  30 year bond vol is dirt cheap, and in the equities TLT and TBT vols are both at 2 year lows.

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Here is the Vol

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