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The upside skew is starting to flatten

 

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Near the end of the day we have a pretty solid bounce in the broader market with stocks recovering all but 6 or so handles from the previous day’s highs.  The reason for the selloff was kind of uncertain, so with just so-so retail sales, things are back up to nicer levels.  As Mark discussed yesterday, the IV only made a tepid response so the bounce is not too surprising.  The quick rally and inability to make new highs over the last 2 weeks has shaken up the upside skew a bit.

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Where is the Vol?

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NFP is a big nothing and earning might be too

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Option Market Predicting a Yawner for Non-Farms

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Last week, we wrote how we expected the ATM straddle to go out somewhere near 18 dollars into non-farm payrolls.  Boy were we off.  Today, the straddle went out less than 12.00.  This means that the market is about 58% certain (greater than 50/50) that the SPX is going to move less than 12 dollars tomorrow.  The VIX and the Vol of VIX both failed to catch any bid this week.

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VIX IV Continues to Be Silly Cheap

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Since the end of the congressional stand off, the VVIX (the vol of VIX) has done one thing: plummet.  For a brief period, VIX vol hit periods in the 50's,  levels not since these options listed in the mid 2000's.    Take a look at how low 30 day IV has gotten in VIX optoins.

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2014 is the year for gamma

The big surprise for me is the lack of interest in volatility into the NFP on Friday.  VIX notched its 5th straight decline going into a big number which is something I don’t remember happening in the QE period since the first talk of taper began.  VIX could easily pop back up tomorrow but for now I would not trade it. 

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VXX short term IV is hitting lows

As 2014 continues with the not much happening award, there are some big mark downs going on in the volatility markets.  Stocks are sitting around, but volatility in the volatility products are hitting some very low levels.

Take VXX turning in 38% implied volatility with NFP still to come on Friday.  It feels like paper has all but taken out the possibility of a move in VXX for this week.

 

LivevolX (r) www.livevol.com

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Let's hope the rest of 2014 is more exciting

Happy New Year!

2014 started off with a big thud.  I do a radio podcast on The Options Insider Radio Network on Thursdays, and there was some speculation that the sell off was from longs needing to raise money to pay taxes.  All the big names got smacked a bit after posting very good 2013’s.  Conversely, gold is launching probably from an end to tax loss selling.  The government is still in the market….

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VIX Rallying With the SPX = UGLY

When the SPX rallies and the VIX rallies at the same time, it is almost always negative for the S&P 500.  Take a look at how SPY vols has been moving and SPY has moved over the last few weeks.

Chart - SPY - SPDR S&P 500 ETF Trust_window_screenshot.png

LivevolX (r) www.livevol.com

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Is the world less risky going into 2014?

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2013 was a blockbuster year for owning stocks.  It was a good, old fashioned bull market that we haven’t seen since the mid 90’s or 2007.  The most interesting thing is the bubble talk in stock prices.  Folks forget where stocks came from.  2011 was essentially a flat year and combined with 2012 the move up was just average.  In 2013 stocks started to pick up multiples as investors look for growth and specifically global growth.  In 2011 and 2012 stock just did not get a growth multiple.

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