Mark Sebastian's blog

IV Blood Bath and Beyond

Bed Bath and Beyond had earnings on Wednesday and completely killed it.  The options were also killed in a complete bloodbath of option volatility (thus the catchy title).  However, I think this is the case of option traders getting a little overzealous in their attempts to sell premium.  Take a look at this chart of BBBY stock and BBBY 30 day IV.  What do you notice?

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VIX the Underperformer

The market had its biggest drop in months.  It below through the 50 DMA, and if things keep going it could threaten the 100 DMA if things keep going.  Today, on CNBC I am sure the anchors are panicked.  Yet,  the VIX was up less than 3 points at the end of the day, despite the SPX closing on the lows.  Why?  Take a look at this chart of the SPX, 30 day IV and 20 day HV.

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CBOE/Option Pit White Paper: A Levered Approach to BXY

This is a white paper Authored by Russell Rhoads of the CBOE and Mark Sebastian Founder of Optoin Pit

Contact Russell Rhoads: rhodes@cboe.com 312-786-5600

Contact Mark Sebastian: mark@optionpit.com 773-969-4667

Click here to read it: White Paper

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SPX Options Overly Discount Scottish Results

I agree with the consus and believe that in the end, the Scotts will do the right thing and vote to stay in the UK.  That being said, I think the market might have discounted that result a little too much.  Take a look at the SPX strangle that expires on the opening print tomorrow:

^SPX Complex Order Ticket_window_screenshot_2.png

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RVX Crush the Next Shoe to Drop

The VIX got creamed today as traders realized that the Fed is probably not going to be that big of a deal.  Additionally,  if the Scotts do what they should do,  the VIX is probably going to go even lower.  Looking accross the board IV got creamed in the SPX, NDX and DJX.  It did not get smoked in the RUT which was the big underpeformer on the way up.  Those that follow RUT know that underperformance is unlikely to last and that the index will POP higher if the SPX stays high (which it probably will).  Thus,  I think there mgiht be some real oppotunity to sell premium in RUT.  Take a look at the price action of the RVX vs the VIX today:

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Our Founder on Bloomberg Talking SPX, VIX, YHOO/BABA

Our founder was on Bloomberg TV this morning
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VIX Is Really Expensive

Today, while the S&P was mostly unchanged, the VIX was up more than .80.  When taking into account for weekend effect a little better than unchanged.  Yet in many respects it should have been absolutely destroyed by the market.  Why?  Well take a look at where movement has been, in and out of meetings, in and out of economic announcements, and wars.  Yet for some reason this Fed meeting is being treated as if there is some fundamental change occuring.  Take a look at the HV/IV spread:

Chart - ^SPX - Standard & Poors 500 Index_window_screenshot_3.png

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Our Founder on Fox Business Talking SPX, VIX and Commodities

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Our COO Discussing Short Squeezes on Fox Business

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And One More Thing VXAPL About to get Crushed

The news is out  Apple is going to have the I-Phone 6 AND the I-Phone 6 PLUS!!! Plus  APPLE PAY and the I-Watch.  Based on what the stock did,  the market acted to the AAPL conference much like McKayla Maroney would to a Silver Medal.  With that the VXAPL got smoked.  Even more so, the VIX options expiring this week and next week took it in the chin.  That being said, it appears the market is still holding out hope for some more movement here is a chart of VXAPL:

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