In a recent conversation I had with Amy Wu of RBC she brought up that one of the reasons that volatiltiy has been so slow as of late is strategic stock buy backs. It has established floors for stocks like AAPL, and potentially even the whole market. Yet, at a certain point, even with buy backs IV's get to the point of being silly cheap. It appears that the VXAPL (vix of AAPL) may finally be bottoming after touching levels that we have never seen before (in this iteration of AAPL). Believe it or not, the stock went up and call buyers entered the market for the 1st time in a while.
A while back when GLD was trading between 165-175 the IV of the options started to get silly cheap. The GVZ which is the VIX of GLD options go to the point where it made almost no sense to sell options. ATM IV too cheap, skew to flat, basically, everyone wanted to sell puts to get long GLD and to sell calls against their long GLD. Well take a look at GLD vol is currently trading:
While most coverage in the media is done on SPX and DJIA, the really interesting index over the last few weeks is actually the RUT. Take a look at the upward momentum in that index. Also, take a look at how fast that movement has been. It's incredible. At the same time the RUT IV is going no where. Take a look:
Every so often, typically a few weeks after AAPL earnings, traders go a little overboard in selling AAPL option premium. Well, it's been a few weeks since AAPL earnings, and traders have sold AAPL IV down to stupid cheap levels...again. Take a look at a chart of VXAPL (the VIX of AAPL).
Yesterday, SPX down 12, VIX up 1.6 points. Today, SPX up 11, VIX down .6. This points toward a continued ramp up in volatility and fear in the market that is complex enough that the media aren't picking up on it, but simple enough that most traders see what is going on and are not wondering if, but when. Well, based on the action today, I would say soon. Below is a chart of VIX and SPX. Concentrate on the 50 DMA (the red line)
As we have stated, the SPX and the VIX are acting quite differently than the last time around. Previously, when the SPX was near 1840 the VIX was below 13, closer to 12.50. Now, with the SPX back at 1840 (getting there in a hurry), the VIX is between 13.75-14, and has not been able to break 13.50. In fact, adjusted for underlying price, SPX IV has basically stopped falling over the last 25 points or so. Take a look:
In the last 3 days, the market has rallied about 30.00 dollars in the SPX. Knowing that, traders would expect the VIX to have gotten completely pasted as traders dumped volatility. Take a look at how S&P has moved and how VIX has moved.