options coaching

AAPL Says Take That Straddle Sellers

This is why we don't sell cheap straddles:  We noted yesterday that AAPL IV was at extremely low levels into its earnings announcment today.  Looking at a two year chart of AAPL 30 day IV one will notice this was the cheapest IV has been over that period of time.

Chart - AAPL - Apple Inc._window_screenshot.png

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The weekly straddle that expires Friday went out at an insanely cheap 22.00 a pop.  For AAPL, where typically one might expect more like 30 and on the low end at LEAST a 5% move, priced in 22.00 is an outlier...as in amazingly cheap.

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VIX Normalizes...for now

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 Today the VIX and the VIX curve normalized accross the board.

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Expect a Little Follow Through

Today was a serious test:  was the market going to completely give it away, or was what we saw today the bottom.  In clear order, it seems that, all other things being equal, we hit a bottom on Friday.  Watching the relationship between S&P and VIX intraday,  one could see earlier in the day, even as the SPX was hitting new highs, the VIX was climbing.  We quickly sold off.  

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Options Less Than Impressed

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Despite the huge ugly day in the SPX and NDX,  something interesting happened.  Every major index saw net premium selling on the day.  Most notably the SPX.  Take a look at the premium flows:

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As Vol Drops VXN-VIX Spread Holds

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As vol rallied earlier this week, it was noted by a few people that the spread between SPX vol, the VIX and NDX vol, the VXN is at its widest point in years.  One might think that with the NDX calming down and VIX moving back to the sub 14 level that the spread would have tightened significantly...it has not.  Take a look:

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VIX Futures Fading

It has been about a month since the VIX broke from its highs.  Since then the S&P has crept higher and/or floated around 1850-1880 somewhat consistently.  While there has been some gyration of prices for the most part,  SPX vol has been stable.  At the same time, VIX has been so stable and range bound at a level that remains stubbornly above 14 and more like 14.50-15%.  However, I am wondering whether that time may be ending.  Take a look at the VIX futures from Today and two days ago.

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Timely CitiGroup Trading

Today,  after the bell, Citigroup had an exceptionaly large put trade. On top of having a much larger put to call ration than one might expect, one has to wonder if the Fed wasnt the only person that thought Citi's capital plan wasn't up to snuff.  IV rallied all day even as the stock kinda just sat there.  The most notable trade was a big 'buy-write' trade where a customer bought the 46 puts and C stock 'delta neutral'

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Sell the Vol Pop Still In Effect

Today,  as Janet Yellen spoke, the markets got spooked.  She seemed to potentially move up the time table on when rates might move.  Markets got rattled...for a second.  Check out the way VIX and VIX option vol (VVIX moved).

Tick chart - ^VIX - CBOE Volatility Index_window_screenshot_0.png

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Tuesday and Vol is Well?

The VIX is now near 14.50,  and IV is now back at 75%.  Sounds great, except, that is still elevated relative to where the lows have been over the last year or so.  So the question is,  is the market ready to start a normal move higher,  or is this a simple break before China and Russia cause more problems?  Keep an eye on the range the VIX trades in, since the VIX topped 20 last month it has failed to hold below 14, additionally IV of the options stayed high and kept creeping higher.  Take a look at the chart below:

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While VIX was Stable VVIX Was Creeping

One of the interesting things to look at is the correlation of a stock to its IV.  One thing we know is that typically,  when IV is creeping up with a stock price,  at a minimum, there is going to be a strong move at some point.  The vol will almost always 'pay the piper.'  We saw this recently in VIX.  While VIX itself stayed stable and (relative to the last year) elevated 14+ ,  the IV of its options was slowly climbing:

Chart - ^VIX - CBOE Volatility Index_window_screenshot_3.png

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