Good Volatility and Bad Volatility, is there such a thing?

One of the cooler things about this job is my occasional stints as a talker on the Option Insider Radio Network (see the link to the right of this blog).  I sit in on the Option Block once a week with Mark Longo, and, occasionally, I do the Vol Views show.  The shows for the most part are all about options and market volatility.  The Vol Views show generally brings in a guest speaker, a trader, a researcher, or industry bigwig, and I get to ask questions and listen to what they have to say. 

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I would not buy GRPN with a Groupon Coupon

Europe is putting big pressure on the US equity market.  In fact, the close to close activity looks  much more benign, I think, than the intraday selling.  After watching the most overvalued security in the world, the TLT, trade to a new high for the year (and it could go higher as the Greek electorate figures out what happens after they get to replace their shiny Euros with TP), I looked at revisiting GRPN just post-earnings.  A few things were bothersome about the activity today. 

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Will FSLR flame out?

Today I am going to call Bizarro Day in the financial markets.  Bond yields were up, stocks soft, gold down, oil down, and Nat Gas was up.  This recipe does not quite add up.  We can chalk it up to no one really understanding what is happening anymore or some giant fund unwinding a position.  Or, maybe, there is some extra angst on the NFP number tomorrow.  Either way, it was a strange day.  Let’s see if the vanilla market activity in FSLR is a good tell.

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Our COO on First Business talking AAPL

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What Effect Will AAPL have on the Volatility Indexes

With all of the AAPL excitement over AAPL earnings, I thought I would skip the discussion on the price action of AAPL earnings on the SPX and the NDX.  I am even going to skip the discussion on the affect of AAPL earnings on VXAPL.  Instead I thought it would be interesting to discuss the ramification of AAPL earnings on the major volatility indexes themselves.

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The bizarre movement in AAPL

MSFT generated a great earnings report today.  Not the growth of AAPL mind you but pretty darn good.  I like to think when I work, I use MSFT products and when I play I use AAPL productS so there is plenty of room for both companies.  I made a crack in our Pro Chat Room today that if AAPL, MSFT and INTC could ever be up on the same day the market will really fly.  It just never seems to work out that way as INTC is down slightly today and AAPL is well, getting shellacked.  So let’s talk about AAPL.

As of around 338 ET the AAPL VIX, VXAPL was down on the day:

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Do Option Values Really Increase Into Earnings?

Heading into earnings season, I thought it might be interesting to talk about how options work into earnings.  In fact, one of the most misunderstood facets of options trading is earnings plays.  There is a major misconception of how options behave into earnings.  Most traders see a chart like this in RIMM and think the following:


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AAPL Options Implied Volatility in the Toilet

It is somewhat common knowledge that I continue to be a seller of option premiums right now.  However, that doesn’t mean that traders should be selling all option premiums.  There are a few tech names where the implied volatilities have been crushed to levels that we have not seen in some time.  Take AAPL for instance:  30 day option implied volatility is at two year lows:


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