Stocks looked ok today until Spain announced they have a case of Ebola in the country. It sounds like a non sequitur but a panic could be bad for mining, airlines and a host of other industries that operate in Africa and transport goods and people. Never mind that Ebola does not transfer from one person to another easily, but we are talking market sentiment here not rational behavior.
Normally I would not do this. At Option Pit we pride ourselves on coming up with our own trading ideas so this is a bit of an aberration. Sure we use client ideas, but heck, they are our clients. This is one that came up in our Pro Chat and it led to a decent trade idea so I am going to share.
I spent a little time looking at VIX vol today. I have to say, it is about as low as it gets...but could go even lower. Take a look at how much HV has plumpted in VIX over the last few weeks. But, taking a look at 30 DAY HV, it is possible things could get worse.
Stocks are going to make a closing high today or near it as I write this post and I can’t help but think we would be way higher if Vladimir Putin could make up his mind what he wants to do in the Ukraine. We know what he wants to do, take a bunch of territory, but the Europeans are still threatening sanctions. That is keeping the VIX into another elevated close and vol. futures bid.
Another day another rally in the good old USA as America Inc. keeps delivering the goods. More solid earnings and home start data got us off to another good start today. Market players are waiting on Yellen to report some lower to stabile rate news, which could send stocks even higher. I see that 200 number on the SPY and can’t help but think that is the next round number to cross the line.
Yet another rally on no bad news as stocks love the lack of action overseas. That was kind of a mouthful. There is no doubt that the gravity is pulling stocks up overall. The rally to all-time highs in the face of overseas unrest is just another reason to believe in the rally. Another reason to believe is the lack of a bid in IV. The VIX cannot hold a bid for anything even as a near panic hit volatility of Friday morning. By the end of today it was all forgotten.
Sometimes customers do really weird things. Sometimes its because they have a strange stock position. Sometimes its because they ahve been given bad advice by a cruddy broker. There are cases where the customer just has a strange idea on how to trade or has no idea how to trade. To be honest I do not know what this customer is doing in MU. Check out the volume and open interest in MU ITM call options in september.
After a weekend of non-activity stocks got back to their old ways and launched this morning without so much as a how do you do. This latest Euro issue has been around since December apparently and Euro bank stocks were already trading at lower levels. Either way VIX and the volatility futures are tanking today and the only thing holding up the IV is the balance of earnings.
There we go stock finally had a solid down day. No wait, that was the opening. By the end of the day stocks retraced half of what they lost and the NDX got to just up about midday before giving some back. It has been a while since a European entity or issue has shaken stocks. The last one that comes to mind was the banking crisis in Cyprus that made Bitcoin a household name.