options mentoring

What a Difference a Day Makes in VIX

I am not sure if the VIX is done moving.  But the market was certainly interested in selling premium today.  Traders came in, ahead of VIX expiration on Wednesday morning, and absolutely crushed October and November in the VIX futures.  Nov futures outpaced the move one might expect from a future with 30 days to expire by a nice margin.  The cash, which also got crushed was down 3.40, while the future was down about 1.80 points, more than the 50% move i might exect.  At the same time, the curve dropped, like a gate back into contango:



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Our Founder on Fox Business

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VIX May Have Finally Caught Up

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The market has been moving at a clip of between 1-2% (today aside) for a few days now.  If one looks at ATR today looks crazy as well in fact.  Looking at GARCH from the last 10 days relative to SPX IV (similar to VIX) it appears that implied volatility is finally trading at some sort of premium to SPX.

Chart - ^SPX - Standard & Poors 500 Index_window_screenshot_5.png

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A Clear Example of Dumb vs Smart Money in a Panic

Today was a crazy day, a super crazy day.  The SPX touched down 10% and then POPPED off that level.  At the same time the SPX went from down 55 points to only down 15.  This happened in an extremely short period of time.  The all out panic took place over a short period of time.  Yet,  one can see that cooler heads never really panicked the way the equity markets did.  Take a look at the spread between VIX cash and the October future.


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VIX Pointing Toward Extreme Preasure

As we discussed on Friday, the VIX was still pointing toward more selling.  Today, the same holds true.  While the VIX is high, it is just now pricing in a 1.5% daily move for the next 30 days.  That is less than the market has been moving the last few days though, and as the market falls,  30 ponits is becoming a bigger and bigger piece of the market pie, which should drive the VIX higher.  Is the market in full capitulation?  Probably not, a couple of major things point toward more selling:

The VIX curve.  Desptie all the fear,  the entire curve has not shifted.  Traders are still pricing in a Christmas vol sell off.  

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VIX Pointing Toward More Selling

Generally speaking, when the VIX is high, its a sale and when its low, its also a sale.  However, there is one time where the expected pay out of selling VIX futures or options is not that great, when the VIX curve starts to do this:



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Our Founder on Bloomberg Callling Market Bottoms Talking TWTR, GPRO

Our Founder was on Bloomberg discussing why he saw a bottom in the market:


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VIX Saying Sell Off Over

While the S&P may have closed unchanged, the VIX was down on the day.  In fact, with the SPX down about 25 points over the last two days, the VIX is actually down .1 points.  Also down VVIX, VXST, basically all indexes that look at near term insurance prices.  Options were for sale today.  Take a look at the tick chart from the last two days.


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IV Blood Bath and Beyond

Bed Bath and Beyond had earnings on Wednesday and completely killed it.  The options were also killed in a complete bloodbath of option volatility (thus the catchy title).  However, I think this is the case of option traders getting a little overzealous in their attempts to sell premium.  Take a look at this chart of BBBY stock and BBBY 30 day IV.  What do you notice?


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