I toss that out there of course and I don’t mean VIX. What I do mean is the ATM volatility for the SPX. With the Greece deal on and off again the one thing that has been consistent over the last two days is the total immolation in implied volatility. The 9 handle for SPX ATM IV is a tough barrier to break because it means traders are actively hitting option bids on the downside to drive the ATM lower. We are almost there.
We are finishing a volatile week for global markets and it most likely will stay that way until the ECB comes up with some announcement on Jan 22nd and/or the Greeks decide to elect a new government by the end of the month. Earnings reports so far have been mediocre and without the promise of domestic QE, stocks have not been able to recover. Short term things will stay choppy.
2015 is starting off as the year of many swings. For all the big daily moves in 2015, equities have not really gotten anywhere. The post-FOMC rallies are fueled by the notion of lower rates and we run. Then the sad realization of why we need lower rates hits and we sell off. The only think I can say for this year is that the swings are solid and VIX is off the basement floor.
As we come to the end of the year I thought I would put out my favorite blog of 2014. It was a lesson on the weekend effect and how traders roll dates forward to pre-load time decay through the holiday. As we are coming into the double barrel of Christmas and New Year I thought this would be helpful. The short answer is selling options on Christmas Eve will not yield the dough one might think.
Realized vol is still high enough that selling short term options could get you in a heap of worry if the Santa Clause rally holds up.
Sometimes options are too cheap to sell.
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Stocks are struggling today to make it to another record for the S&P 500. As of right now a little push at the end of the day should do it. Without anything news worthy I don’t expect stocks to do a whole lot. A stock that has been doing a lot is BABA.
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.
“Unlock The Secrets Of The Mysterious VIX…
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.
LivevolX (r) www.livevol.com