The TWTR lock up ended not with a bang, but a plunge through the ice. TWTR closed on the lows and a new low since the IPO today. The action felt like a big lock up, seller wanted to get out as the selling was steady all day long. I am not sure that they are done yet.
TWTR seemed to drive down most of the social networking stocks and the wave hit banks and other names. With a near 1% drop in the SPX, the VIX was only up .51 points, which is a little light. The big reason is that implied volatility has been over priced for a little while.
Somewhere, as the market kicks around the all-time highs, the tech stocks are recovering from the shellacking they took. I don’t know if NFLX will see $400 this year or TSLA $255. We do have volatility in the large indexes scraping the bottom of the barrel so the big tech selloff has subsided for now.
The Fed surprised no one and is continuing to taper out of their bond buying program. While the real benefit will be endlessly debated, stocks have had a hard time making a whole lot of headway since the reductions started in earnest in Jan 2014. The 1-1.5% upside gaps seem to be a thing of the past unless stocks have come of a bottom.
Stocks have been making small gains over the last two days as the great tech sector rotation has moved from the new tech stocks back to the old tech stocks. The high fliers in 2000 are starting to fly again and the Young Turks in social networks have taken it on the chin as they drop like Icarus from the sky.
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.