option mentoring

Volatility Tension

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With 4 ½ weeks to go in the VIX Aug cycle, there is not a lot of enthusiasm for the August VIX future.   Is it cash too high or futures too low or just a combination of them both?  There was an average mark up in VIX due to the weekend but not much more than that.  Stocks sold off but really did not have a lot of gas to keep going down.

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INTC is partying like it is 1999

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More Yellen testimony hurt the RUT and VIX today as both those indexes made some pretty good size drops.  With a lot of old tech like MSFT and especially INTC, starting to trade at multiples out of the single digits what is volatility to do.  A client wrote me today and asked if  CSCO is next?  All of a sudden establish companies are doing something not many thought possible a year ago and that is deliver some growth.

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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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Why is the term structure so flat?

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So the day after Euro Zone disaster light and stocks found their footing by eking out a modest gain.  It was still not enough move much but the stock market has been remarkable resilient in shaking off minor irritations.  That brings me or our volatility view of the week.

Note the very flat term structure in the volatility curve for VIX.  The August future is a $1 over and Sep $1.65.  We have been used to 30 day futures of at least $2 in premium on average for the last several years so what gives?

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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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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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Is YHOO back?

Don’t forget equity option exchanges close at 1 pm et tomorrow.

At this stage of the game the NFP trade seems over.  VIX is closing sub-11 and the SPY managed to eke out another closing high on the solid ADP jobs numbers.  The moves we usually get in stocks and volatility after the NFP already happened.  Sure there might be a nasty surprise but VIX looks poised to print sub-10 for the first time in a long time.

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Gold Vol is too cheap again

Records, records everywhere today as the major indexes posted new highs for the year.  I don’t know what the headline rally was that got the buyers excited but there are some choices: first day of the quarter, POTUS goes around Congress on immigration, so-so economic numbers, Iraq is still a mess, etc.  In short there was no good reason for the rally except that we are in a bull market as global economies shake off the financial crisis.  It will probably stay that way for a while.

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Hello, Avon Lady

A dead day is a dead day.  And today the market is living up to its low volatility number by putting in a .14% drop today.  That is hardly enough to register on the VIX-o-meter.  Any little blip in activity stands out more on a day like today.

Note the activity in the AVP Aug 13 puts.  Paper bought a big block of puts and most likely this was tied to stock.  As we move forward earnings are usually on the 1 day of August in AVP.  This is pretty early in the earnings cycle to buy a big chunk of juice.

 

3D volume charts by OptionVision

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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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