options educaiton

RVX is Probably Cheap

While most coverage in the media is done on SPX and DJIA,  the really interesting index over the last few weeks is actually the RUT.  Take a look at the upward momentum in that index.  Also, take a look at how fast that movement has been.  It's incredible.  At the same time the RUT IV is going no where.  Take a look:

Chart - ^RUT - Russell 2000 Index Livevol_window_screenshot.png

LivevolX (R) www.livevol.com

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VIX and Bond Prices: Near One and The Same

We continue to say that bond prices drive the market.  Here is some intraday evidence.  While they do not perfectly coorelate,  I think one can quickly see how smart paper in bonds (via TLT) and VIX are thinking along similar lines.

VIX_16.PNG

LivevolX (r) www.livevol.com

I think the bond market is near calming down at which point so will VIX but the next day or so could be interesting.

The Trade:

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AAPL Setting Up For Excellent Calendar Spread

What makes a successful calendar spread?  It's actually pretty easy to figure out:

1.  Buying low overall Implied Volatility

2.  The right spread between months

In other words,  being able to buy the back month option for a cheap price and then, relative to the back month option, being able to sell the front month option for an expensive price.  Here are a few things that don't matter:

1.  The time frame of the trade

2.  The Theta (if you are using spreads as a theta play and not trading the vols, you will lose)

3.  What months are bought and sold

Calendar spreads can pop up in odd places in some of the most active names.  For instance, take a look at December IV vs Jan IV in AAPL:

GLD IV at a 104 Week Low, Precious Metals Getting Smacked

While many traders are talking about the low VIX (in IV terms yes, in HV terms debatable), under the radar is a different type of volatility sell off, commodities and precious metals.

SPX Up, VIX Up, Volatility Continues Trend Higher

When I asked on Wednesday if the VIX had topped out, the market responded with a resounding "NO!"  Since Wednesday, we have seen

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