IV

Just a Bit of a VIX Squeeze

Today the SPX finally broke its streak of not closing up or down 1%.  While that is certainly important to note, it is not the most important thing that happened today.  What most important is how flat footed a few trader got caught.  While the S&P moved, the VIX exploded.  The VIX moved from the low 11's to almost 15% in one day, in what turned out to be an exceptionally short period of time.

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TWTR volatility gets whacked as bad as the stock

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For a brief second today stocks were starting to look good.  It was better than a second, it was more like most of the morning into early afternoon, then the sadness came.  Sadness came to TWTR on Tuesday and there was a bit of a let up today.

Note that vol. across the term structure got savaged by the close today.  IV in June traded into the 50 handle and near term IV was down 15 points.  What does that mean?  Most likely there will not be a parabolic bounce in the stock.

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Putin' on the Vol

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FB closes at a record high

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While the market waited for NFP numbers to come out on Friday, the Fed declared the subzero temperatures as a drag on the economy.  Unless you were selling de-icer or coffee during February, they were probably right.  A little milestone kicked in today, in case you were not watching; FB closed at an all-time record just shy of the intraday high.  Last year folks were wondering if this was the worst IPO in history, and this year they might be wondering when FB gets to $100.

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Bond volatility is still cheap but the HV is not

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Argentina devalued the peso today along with China providing less than stellar manufacturing data.  It all added up to a mad dash for Treasuries and other safe havens like the Euro.  What a difference a year makes.   It was not too long ago that the run to above 3% in T-bills was a sure thing.  At least, over the last few weeks coming into 2014 that is not the case.

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Is the retail sector for sale?

 

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TLT IV's Seem Too Cheap

It appears that the movement in the 10 year note has stopped being completely crazy.  However, this does not mean that movement has stopped all together.  In fact the 10 year and 30 year are both moving at a nice clip on a daily basis.  The 14 day ATR on the 10 year is still WAY above where it traded before the ‘taper talk’ began.  Looking at ETF’s that ATR of TLT is about 1.25 a day over the last 14 days.  Yet, take a look at the 30 day IV chart of TLT

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Flat Skew into FB earnings

The earnings season has been a mixed bag so far.  Mark commented about it on CNBC yesterday morning and the fact that IV is not really taking off.  VXX is making year lows today and the IV in the SVXY (Pro Shares Short VIX futures ETF) is making a 52 week low today.  Even with VIX cash up the VIX futures compressed a bit.  The only thing cheaper than the IV is the realized volatility clocking in a at 7.27 for the SPX.  The low volatilities seem to set a table for something higher down the road but we will need a catalyst.  The earnings season has not provided one and the muted movement is having an effect on the skew in FB.

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VIX About To go Backward

The VIX cash has been backward over the VIX futures for a surprisingly large portion of this month so far.  The same cannot be true for the VIX futures themselves.  Usually the sign of an official sell off, the VIX futures have yet to go backward since this sell off began.  However, if we get one more day like today, I think that all changes.  The VIX curve is about as flat as it can get without being backward:

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PG Trade from Bloomberg's Lunch Money

Today, our COO Mark Sebastian was on Bloomberg TV to discuss options on P&G.  He made two points about P&G

1.  That it was an industry play:  XLP is near an all-time high and is weakening because of rising bond rates

2.  That this is a company play: P&G has underperformed, can the new CEO fix the problem.

Watch the replay below:

 

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