Sometimes clients ask me what trading in the mid-to-90’s was like and I tell them, “fun”! There was Long Term Capital and the Russian Debt crisis but really those were small blips in the rally. The big internet boom was booming and aside from those sharp but short drop offs stocks flew and volatility went up with it. There were many days when stocks just took off for $50 rallies and then did it again the next day.
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As we wind into Thanksgiving the liquidity providers have done a good job of squeezing out the holiday premium. Nov 27 volatility in the SPY, from LiveVol Sigma, is a round 9.43 and will be lucky to hold the 9 handle as Thursday approaches. Why? Well the only easy to get the time premium out of the options is roll the days forward. That will read as lower IV today.
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.
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We all know the story. Troy is finally sacked by the gift of an enemy-impregnated horse the size of a house. Browsing through the WSJ online I see an an Orthodox Priest blessing a fleet of aid trucks. I half think there might be some Spetsnaz Commandos lying in wait in those bad boys. With the gimpy stock market today I am not the only one. I am all for Putin giving aid to the hungry but it is still tough to believe.
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Step into the Wednesday time machine and not much happened between then and today. Traders have been so lulled into a stupor with the lack of movement that they bid volatility up to 15% yesterday when it looked like there was another crisis brewing. As of today no crisis, as holders of GOOG and other earnings reporters rejoice in the upside surprises.
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.