options trading

SPX 2017 and All Is Well??

Anytime the market hits an all time high I typically expect to see either a near low term or at least close a near term low.  This is not the case with the SPX and the VIX right.  SPX is at an all time high but the VIX is about 2.5 points higher than it was the last time we got up here.


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The Trade:

Straddles continue to be too cheap in my opinion,  when the SPX is at an all time high and VIX is still elevated, the underlying is going to keep moving

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Loved Stock Trade in FB

I have been discussing what I call the 'LOVED STOCK' earnings chart over the last few days.  This is a pattern where an AMZN, NFLX, or FB rallies in anticpation of earnings.  The stock then gets sold out of earnings as it disappoints traders.  Finally, within a couple of days of the sell off the stock begins to rally again earasing some of the losses from earnings.  The only stocks that are 'loved' that did not show this pattern so far is TWTR.

With FB appearing to create this pattern and FB IV in the dump (See chart)


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Graphic Evidence of UVXY Crudiness

Over the last 3 months both VIX and VXX are actually up (albeit slightly for both).  You know what is not up on the year,  UVXY and TVIX.  The combo of levering and contango make the product pretty great in a market where the VIX is exploding (see mid October)  but pretty awful the rest of the time

Chart - UVXY - ProShares Ultra VIX Short-Term Futures ETF_window_screenshot.png

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The Trade:

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Next Week's ATM Straddle is Too Cheap..AGAIN

Last Friday we wrote how the SPX ATM straddle was pricing in a level of around 34 bucks a spread,  this after the SPX had just ripped up 70 points or so.  At the time VIX was around 16.  Since then the market has ripped up higher a little over 35 points.  The straddle is worth close to 40.00 a spread.  Today, the VIX is down to below 14.50 after moving 35 points in 3 days.  With 8 full trading days to go, the SPX straddle expiring next week is pricing in under 33.50 dollars a spread.

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VVIX Remain Sky High

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While the S&P 500 has recoverd to its 100 Day Moving Average (we shall see if it gets past their)  the VIX and VVIX remain high relative to where they were at the beginning of the month.  For the VIX this makes some sense as Friday and Monday were the first back to back less than 1% movement days in the SPX in sometime.   VIX options also continue to have extrodinarily high vols.  The VVIX, the VIX of VIX has remained above 100 for a long period of time.

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Is Next Week's SPX Straddle Too Cheap

The SPX ATM straddle expiring next week is trading just a tick over 34 dollars a spread.  Under normal circumstances, the risk chart below would seem to pricey for me.

Risk Chart - ^SPX - Standard & Poors 500 Index_window_screenshot.png

LivevolX (r) www.livevol.com

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As VIX Tanks SPX Vol Still Robust

If you arent aware that the VIX is about half of itself from its peak last week,  its time to take notice.  What is interesting is how right the VIX really was at the time.  leading into the sell off the VIX was creeping higher, closer to 16 or 17%,  climed to above 20% pretty quickly and topped out last Tuesday when it settled lat about 26% or so.  

Chart - ^SPX - Standard & Poors 500 Index_window_screenshot_6.png

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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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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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