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.
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?