QQQ IV is at 3 month highs and near highs for the year. So naturally the many traders are thinking we should sell premium? But does that make sense? Take a look at 10 and 20 day HV compared to 30 day IV in QQQ:
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The VIX is trading around 12, which implies that the market is going to move about .75% a day, if it is priced perfectly. In the last two days, the SPX has moved about .66% and over the last 10 and 20 days it has moved less than 7%
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Stocks sniffed all-time highs again and pulled back from the brink. The simple answer is there is no reason to be running at all-time highs. That was enough to push stocks back off of their shiny new plateau. Since we are a volatility shop, let’s look at the underlying currents. The first stop is SDEX, it's still at nosebleed levels.
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One of the things we concentrate on in our option mentoring is trading indexes. There is plenty to be made in the index space, typically on the short premium side. In the case of all the indexes IV has been overpriced for so long, all the way down to these levels, and continues to be overpriced. Index IV has been overpriced for going on a year and half and there is no end in sight. Perhaps the worst offender is NDX, especially in the past few weeks.
Take a look at the way the Index has moved since the beginning of the year, or more...HASN'T moved.