AAPL pulled every trick in the book with good earnings, a stock split, and a buy back. Toss in a dividend boost too for the long suffering shareholders who paid $700. That was enough to send AAPL up $40 today. With good news from AAPL and FB the SPY was up .40! Not a rousing vote by the rest of the market and it had nothing to do with AAPL.
This is why we don't sell cheap straddles: We noted yesterday that AAPL IV was at extremely low levels into its earnings announcment today. Looking at a two year chart of AAPL 30 day IV one will notice this was the cheapest IV has been over that period of time.
The weekly straddle that expires Friday went out at an insanely cheap 22.00 a pop. For AAPL, where typically one might expect more like 30 and on the low end at LEAST a 5% move, priced in 22.00 is an outlier...as in amazingly cheap.
There was another nice little rally today on the back of some decent earnings reports. The tech end of the market has largely shrugged off the GOOG earnings and is looking forward to FB and MSFT. Note how I did not mention AAPL.
Two days in a row of small moves is enough to give the most die hard juice buyer indigestion. The volatility of VXX options is now sub-50, 30 days out. For VXX, peaking around $46 a few days ago, the vol ETP is sliding toward $40. A level it has not been able to stay below since January, before the emerging markets crisis. Do you remember that?
It looked real ugly this morning toward noon. From what I could tell there was enough decent news to push stocks higher pre-open and then the flood gates of selling opened, hitting the momentum stocks particularly hard. The on again/off again saga of the Russians camping out in the Ukraine is putting the market into a tizzy. A near term weak market gets downright ugly when the liquidity dries up after countries start shooting at each other.
Today was a serious test: was the market going to completely give it away, or was what we saw today the bottom. In clear order, it seems that, all other things being equal, we hit a bottom on Friday. Watching the relationship between S&P and VIX intraday, one could see earlier in the day, even as the SPX was hitting new highs, the VIX was climbing. We quickly sold off.