Stocks continue to rally with the earnings surprising just about everyone. Day to day the SPX finds a way higher and higher for no apparent reason. The squeeze in commodity names has the whole sector trading again. Witness the dead turnaround in the miners today. If all that excitement is too much for you, boring old INTC might work.
Somewhere along the line stocks stopped worrying about China, oil prices and mass currency devaluations. My sense is that stocks like certainty and for now neg interest rates, while crazy, are at least certain in several G7 countries. Let put that aside as stock rocked to the sandbagging JPM as the financials showed up today. The big daddy lately has been oil and with the Doha OPEC talks this weekend my thoughts turn to gamma.
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TSLA has showed a backward term structure for a few weeks. I think it has to do with pre-orders for the new affordable e-car delivered sometime in the future. All I can see is the TSLA Apr 01 Weekly 227.5 straddle is $11+ bid. Someone wants to pay 90% vol for juice in TSLA outside the earnings cycle.
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We have one uneventful day and SPX tumbles 13 points causing the VIX futures to get heart palpitations. 3 weeks ago this move would have been a morning romp but the 8% SPX realized vol took all day to squeeze out this dive. As usual look to what the VIX futures were doing to read the tea leaves.
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I am not sure conundrum is the right word. Maybe it is more like a situation. VIX is falling very fast at this point with the 3 day weekend coming on the back of declining volatility across the market. Today the quick Weekend markup for IV went south in a hurry as we closed 13.79 in VIX and the 13 handle for the first time in 2016.
Something happened on the way to the Non-Farm Payroll number. The market stopped giving a darn in a big way. The rally on neg interest rates in Japan (really!) and better than expected manufacturing numbers gave investors the reason to buy stocks again. All the big indexes were up 2% at least as the short took it once again in the shorts. What was not up was VIX. I wrote last night the possibility of a move but not expect it until after the number. As they say, things happen and VIX rolled to a closing low for a volatile 2016.
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As 2015 draws to a close on low volume and kind of ugly action, I try to figure out what the next year is going to be like in terms of volatility and the VIX. Some general observations from this year:
VIX as of today is up a point with stocks around the same place from last year.
We had another Flash Crash in August for no real reason.
It sounds scary but it is not.
The Santa Rally is in effect for now. SPY managed to eke out gains for the year helped not one wit by AAPL. The late in the year commodity rally is not hurting either. OPEC says oil will be back to $75 in 2019 or whatever and that was enough to lift crude a buck or two. The story is still volatility as most of the headline volatility products are still showing signs of life. That means the VIX futures have yet to collapse.