implied volatility

MU Call ITM Buying

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.

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Livevolpro (R) www.livevol.com

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Is the FB vega too cheap?

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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.

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Portugal sneezes, market swoons

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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.

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Guess the Volatility Chart

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The following shows a vol chart of a high dollar stock,  The Stock has been a high flier and has had wicked moves.  The IV has been extrememly bid relatively consistently, yet over the last two months the undelrying stock volatility has changed.  The stock has no longer been moving around as much and has become somewhat range bound.  take a look and see if you can guess what the stock is:

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Are we running out of volatility to sell?

That is the question I am asking myself.  I show IV now in the 6 handle for OTM calls in the SPY.    This is on top of the SP 500 moving into record territory again.  We are moving into the realm where the upside is so cheap no one wants to sell it anymore.  Fund managers looking for extra yield are going to start selling calls in stocks if they cannot get the dollars they want in indexes.

Upside IV is in the 6 handle!

 

3D chart by OptionVision

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VIX Not Going Anywhere But Down

Currently the VIX futures are trading at a premium of less 1 point relative to the cash VIX.

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www.VIXCENTRAL.com

With more than two weeks to expiration, this is a pretty light spread.  When taking into account that the cash VIX is in the 11's and the Future is 12.45 this is incredibly low.  Basically, traders think that a cushion of about .95 and a VIX future of less than 12.5 is plenty of spread to handle any upside risk in VIX.  Why?

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VIX has its revenge

With Syrian warplanes getting into the mix stocks took a slight pause today.  Between Syria and Iran the ISIS militants have found a more able adversary.  Early in the session the NDX was moving into some lofty ground but by the end of the day started to head into negative territory.  The only names still up were Treasuries and the volatility products.

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Gold downside skew showing the love

The big action today was in the price of gold.  Stocks managed to eke out a new high but gold was really the kicker.  Maybe the threat of inflation is back in the game but gold for sure was up around 3.5% today.  We had looked at gold volatility in the Option Pit Chat this week and we thought it looked cheap.  The 10 day straddles were pricing a 2.10 move and the move today was 4.27.  So much for the implied volatility being correct.

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Is PLUG back from the dog house?

The Fed is staying the course and winding down their bond buying program.  We have some higher short term rates but lower long term rates on the horizon as growth is better but still slow.  That is exactly what the Fed wants.  Slow and steady wins the race and for now stock like the news.  Maybe we can catch a bit more rally if we can put the Middle East genie back in the bottle.  For now VIX is taking a thumping as the good economic

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VIX is well priced for now

As I write this the AAPL WWDC is going full tilt and the stock has not been able to hold up for most of the day.  Granted it had a near $40 run up last week, $606 to $642, so a pullback is not out of the cards.  That run also helped push the SPX to record highs on not the greatest news in the world.  Part of that run is helping to damp down the volatility a bit in the big indexes of which AAPL is a part.

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