options coaching

Has the Weekend Effect Moved?

The blog post that really broke out our blog was this one involving Time Decay and the Weekend (we will always have a special place in our hearts for Bill Luby pushing it out).   To sum up the post, we explained how market makers 'moved the clock' on their machines to bring implied volatiltiy down with out screwing around with their actually vols they were running.  The basic point is that market makers take weekend decay out over a few days at the end of the week which causes VIX to drop on Thursday's and Friday's and to rally on Monday's.

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VIX Futures Ahead of the Curve

Yesterday I made a comment on how I thought VIX futures were maybe oversold.  I was right, but not in the way I thought.  Today, despite the VIX threatening 11.5% and the SPX hitting an all time high, the VIX futures curve barely moved:

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www.vixcentral.com

The reason they didn't move was because the VIX futures were oversold.  They were anticipating today's move and were pricing in the cash VIX adjusting to the futures, not the other way around like I thought.  Notice how on top of eachother the curve yesterday and the curve today are, then notice the difference in VIX.

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VIX Might Be Overdone

While I believe that the VIX is not going to 20,  I think today's move below 13% might be over done.  The VIX has not just eased off the last few days, it has borderline crashed.  Take a look at how it looks incomparison to the S&P:

Chart - ^SPX - Standard & Poors 500 Index_window_screenshot_2.png

LivevolX (r) www.livevol.com

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NFLX Vol Probably Too Cheap

We all know that as companies mature there can be some permanent changes to the implied volatility of its options.  They can go from low to high and back.  Think how the IV of Corning (had their been options) would have appeared when they were in the business of making ugly cookware vs high end glass.  That being said,  when a stock hits a certain level of volatility that the options become disgustingly cheap it usually makes sense to buy some premium.  Take a look at NetFlix IV:

Chart - NFLX - Netflix Inc._window_screenshot.png

Livevol (r) www.livevol.com

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VIX Buying Explodes on SPX Technical Levels

I am not one to be into technical analysis.  However, to say that they completely don't matter is probably a stretch.  For instance, up until today,  the 100 Day Moving Average was acting like a trampoline.  Everytime the S&P touched the level it would bounce.  If you think traders weren't watching the level, take a look at how the VIX would move when the SPX crossed 1913 (the 100 Day)

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Livevol (R) www.livevol.com

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Replay of Andrew's Covered Call Webinar

Remember: Use code OA94 to take 25 dollars off our BOOT CAMP.

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VIX Not Fully Vested in Rally

Free Webinar:  Using Options for Directional Trading,  join the event HERE.

While I do agree that there is little predictive value in the VIX on its own,  two things that I do think have some predictive qualtites are the relative performance of VIX relative to the SPX and VIX term structure.  The one I want to concentrate on today is term structure.

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VIX and VIX Futures Could Break Coorelation

I do not think today is the beggining of the end.  That said, I think there is a good chance that there is at least a little follow through tomorrow (unless there is some sort of crazy surprize in non-farms).  Even so,  unless the market is down another 1%+ tomorrow, there is a chance the VIX might actually fall or remain relatively flat tomorrow.  At the same time,  I expect that VIX futures and the VIX ETN's might all be green tomorrow.  Take a look at the VIX vs the CURVE at the close (there was a big TAS trade that ran VIX AUG up after the bell).

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www.vixcentral.com

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We're Going to Need a Bigger Blog.....SHARKENDAR SPREAD!

Ahead of the big premier of Sharknado 2 tonight,  I thought it would be fun to look at a potential trade on Comcast, which owns NBC, which owns SYFY, which is showing Sharknado.  Do not be surprized if this showing ends up being the biggest broadcast in SYFY history.  While SYFY is not a large part of Comcast,  whether it actually has an effect on long term earnings or not doesn't matter.  I think the ratings on the broadcast will be so high that tomorrow CMCSA might get a small bounce.  Regardless,  the term structure is such that I think a sale of bullish front week calls might make some sense.

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MU Call ITM Buying

Sometimes customers do really weird things.  Sometimes its because they have a strange stock position.  Sometimes its because they ahve been given bad advice by a cruddy broker.  There are cases where the customer just has a strange idea on how to trade or has no idea how to trade.  To be honest I do not know what this customer is doing in MU.  Check out the volume and open interest in MU ITM call options in september.

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Livevolpro (R) www.livevol.com

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