In yesterday's blog we discussed how the VIX was not impressed by this rally. Today I think its safe to say that the underperformance of the index pretty much confirmed. VIX correlation to its underlying is one of the best way's to call a pop and this was no different.
So far this earnings cycle we have seen big wins in tech out of GOOG, NFLX, and no AMZN. Flops have come from AAPL, IBM, and MSFT. Take a look at the pricing of AMZN from today (now up about double the straddle price).
Livevol (r) www.livevol.com
NFLX had earnings today and the stock moved 17.00 dollars, rallying past 115. The straddle was pricing in a move of less than 10 dollars yesterday. Hey, surprizes happen...however NFLX has outperformed its earings straddle for 4 straight quarters, ever since they started producing their own content. Take a look:
www.livevol.com LivevolX (r)
Today was certainly a rough day for the S&P 500. Like Clockwork it tested the lows from the day before, but managed to hold. With that the VIX exploded higher settling near 19.65. In fact the whole cruve is in backwardation through the August contract. But that doesn't mean there isnt trading opportunity. Take a look at the front of the VIX futures curve.