implied volatility

The Next Internet Craze

Well, maybe not the next internet craze, and no this is not the title of the next Michael Lewis book.  The craze has already come and gone.  I like looking at new products and this KWEB (KraneShares CSI China Internet Trust) is interesting in that it has flown under the radar for a while.  No options trade on it, (hint: CBOE list them!) but the product moves around pretty good.

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I guess that NFP number still matters....sort of

The stock market looks like it has had enough of tepid job reports.  There were big hopes of 275k plus jobs, but all of those hopes were dashed today.  The happy number was private payrolls are back up to the pre 2008 crash highs.  I guess that means government payrolls are not, but somehow we are spending a whole lot more money than we were back then.  Either way stocks were a bit grumpy about it.

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Are the VIX futures signaling a vol smack?

A topic that is consuming the Pro Chat group at Option Pit has been the relative stickiness of the VXX lately.  There was finally a break in the product over the past few days, but for the most part VXX has decayed much less than expected so far this year.  I won't trouble you with the whys, but much has to do with how the VIX futures are acting. They just don't decay like they used to.

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The Vol of Vol is getting smoked

For the first time in a while the VIX is getting smoked with a jump in the market.  I don’t think it was Paul Ryan’s balanced budget proposal, but it probably did not hurt. Stocks did not get the crazy 1.5% move on no news, but a solid .60% move.  That in general proves to be the volatility crusher, as slow but steady gains bring in the put sellers and start the risk train rolling again.

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Old tech is new again

One of the most interesting things as the quarter pulls to a close is to see where the money is going today.  It is not going to NFLX, GOOG and FB.  After taking a good pasting the last couple of weeks, the darling stocks have not been able to get up off the mat.  They are still up a bit since January, but definitely off of the nosebleed levels of a few weeks ago.

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No Weekend decay today

Stocks made a little rally today on the good economic news in the morning.  Much of the early gains went away as the day wore on.  For what seems like the 5th time this week, the VIX cannot hold the lows of the day into the close.  As I write this, with 30 minutes to go today, the sub-14 VIX came and went with the slow deterioration of sentiment.

Where did it come from?  To keep with the story of the last couple weeks, the OTM puts continue to attract the attention of premium buyers.  Maybe the Russian’s massing on the boarder has something to do with it but there is still a bid for OTM IV going into the weekend.

 

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Someone called the top in the growth stocks

Following up on Friday’s action we did get a little pull back in the index skew today.  VIX is in a touch and most of the vol. ETP’s might be even or down a touch with the market rolling in down .3%.    There still feels like something is brewing out there, but I cannot put my finger on it.  Gold is getting trounced since Ms. Yellen is looking more hawkish than dovish.  Who knew?  T-bonds are still clinging to some near term highs and that always gives me the heeby geebies until the shoe drops.

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They crushed the VIX, right?

Well, like the Greek referendum in 2012, they came, they voted and stocks rallied.  I am talking about the Crimean’s who don’t seem to want anything to do with the rest of Ukraine.  How it all shakes out is a bit of a mystery, but some very select Ukrainians and Russians will not be able to go to their ATM machines anymore when they fly to London or New York.  That message hit loud and clear as both Russian and US stocks rallied back a bit today.

At the money volatility got hit in all the big indexes as you can see from the Livevol Term Structure slice below.

 

charts by www.livevolpro.com

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That is not Sputnik, it is the VIX

The VIX kept winding its way higher and skew keeps winding its way higher.  Stocks in general today were a mixed bag, with the SPX down .3% or so.  The darlings got hit (FB, PCLN), but a good chunk of stocks were up on the day.  It is tough to justify today’s VIX on today’s equity movement.

The panic rise in the VIX is from what might happen come Monday.   See here how the VIX cash spent most of it day running and then selling off, only to get running again and level off  into the close.  A 1.6 point move in a 16.22 VIX with a .3% SPX index move is a signal for a good size move, up or down.

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Skew might be at a short term peak

I am of the belief that politics will trump economics when it comes to the stock market.  What I mean is, one politician can do more to destroy (or help, but rarely) an economy with the stroke of a pen than all the good earnings reports combined.  Lately, that politician has been V. Putin since the Russians loss at the Olympics.  He has been all sorts of grumpy and decided to take over a small piece of the Ukraine to make himself happy.

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