Mark Sebastian's blog

Oil Option Markets Calling a Bottom?

In 2009, the SPX continued to sell off, yet,  for the year, the VIX trended down, for the most part, all the way down to the bottom on March of 2009.  While the market was lower VIX was not much higher at all.  To many this pointed toward a sign that the markets were.

1.  Less frightened and buying less protection

2.  Potentially near a bottom.

Take a look at a chart of OIV.  Notice that while WTI is threatening to head toward its lows,  OIV, the VIX of WTI options is barely moving.  

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VIX MEH Signal Confirmed and Validated

In yesterday's blog we discussed how the VIX was not impressed by this rally.  Today I think its safe to say that the underperformance of the index pretty much confirmed.  VIX correlation to its underlying is one of the best way's to call a pop and this was no different.


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VIX Say Meh

The S&P 500 is in what appears another decent sell off.  At the lows today, it was near levels that we saw in the sell offs surounding Greece.  In fact, with another similar drop to today,  the S&P would be right near that recent low close.  Yet, take a look at the option market.  While during the Greek Crisis VIX touched into 20,  This time the VIX has barely touched 16 and does not seem to be a threat to get to 20 with out another bigger push lower.

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Content is King Another CHEAP STRADDLE

So far this earnings cycle we have seen big wins in tech out of GOOG, NFLX, and no AMZN.  Flops have come from AAPL, IBM, and MSFT.  Take a look at the pricing of AMZN from today (now up about double the straddle price).


Livevol (r)

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Why Are NFLX Traders Always Wrong

NFLX had earnings today and the stock moved 17.00 dollars, rallying past 115.  The straddle was pricing in a move of less than 10 dollars yesterday.  Hey, surprizes happen...however NFLX has outperformed its earings straddle for 4 straight quarters, ever since they started producing their own content.  Take a look:

earnings_divis_-_nflx_window_screenshot.png LivevolX (r)

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