realized volatility

ZNGA lives!

Submitted by atg on Wed, 05/15/2013 - 4:45pm

I want to characterize today with movement. AAPL trades from 441 to 422, GOOG trades from 894 to 916 and PCLN from 789 to 808. Stocks are moving again and I alluded to that yesterday that the realized volatility for names is starting to pick up. VIX managed up .04 but really the story is that stocks are moving and the reason is money is coming back into the market. I think this means that things that really were not possible with positions most of last year are possible now. You can buy some options and have a shot at making money. Let’s look at a stock in the basement, ZNGA.

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VIX up and SPX up so is a crash imminent?

Submitted by atg on Tue, 05/14/2013 - 5:27pm

Memory is a funky thing in the market. Right now many new investors and traders have the 2008 crash in the forefront of their minds. I don’t blame them. What we have had since then is mostly a declining volatility environment that has reared its ugly head on the big macro issues that faced us, namely the Euro and the US deficit. Remember it was the 1-2 punch that set things backward in the summer of 2011 since it looked like a total failure by leaders to get a handle on the problems of the day. Right now the trajectory appears to be better. How do we know? Every advance in fiscal prudence, even higher taxes, has been met with market rallies. Bernanke was QE’ing back in the Fall of 2012 and the market did not really take off until the Fisca

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How low can the volatility go?

Submitted by atg on Fri, 05/03/2013 - 3:59pm

Somewhere between the ADP report on Wednesday and today’s NFP report the nation found a bunch of jobs. The broader markets also found themselves in record territory with NASDAQ making at least multiyear highs. What I find heartening (for bulls like me) is that the Treasuries are finally weakening with a near 3 point drop today. If the rally has to continue folks need to stop running to no-yield bonds. With better jobs news the need for the Fed to buy more is a much tougher case to make. The thing is we have .75% gaps in the SPX still and while the realized volatility has tailed a bit we are getting one to two days a week of bigger moves.

The Soros Put on JCP

Submitted by atg on Mon, 04/29/2013 - 3:49pm

Kind of a bubbly day today as the market stretched out a little bit and put the rally cap on. Several factors, mostly big picture stuff like the consumer and Italy, help buoy spirits today. Of the market in general we have been getting to these highs on higher realized volatility than in the past. 10 Day HV from LiveVol© is clocking in at 18.62 for the SPY and after today’s upswing that number will only wilt slightly. I spend a lot of time watching realized volatility because that tells me the “how” of movement. Look at JCP lately.

Getting creative with BBRY

Submitted by atg on Wed, 04/24/2013 - 4:04pm

We were closing a position in the SL today and it was a ratio put spread turned into a very cheap (.04) butterfly and my feeling was BBRY is not quite done. Earnings are coming out in the July cycle and some trades that have been working very well lately are the modified earnings plays. What do I mean by that? Well the idea is to own gamma and pay very little in theta for duration of the trade. It is what Mark Longo calls on the Option Block “juice for free”.

Has VIX Gotten Too Cheap?

Submitted by msebastian on Mon, 03/04/2013 - 4:27pm

One of the interesting things to watch, that I think shows how jittery this market is, despite the rally, is the actual volatility of the VIX. Over the last 10 days, the Vol of VIX (not VVIX) has been near 220%.

Gotta like this...

Submitted by atg on Fri, 03/01/2013 - 4:24pm

The market had a bit of a reversal on Thursday for what reason I cannot quite figure out. Maybe politics but the economic news all week has been ok. Today there is the big shrug on the Sequester so maybe the politics will start to seep out of the market. One could hope. One name that took off on the close yesterday was Facebook (FB). FB spent most of the day in the mid-26 level only to ignite on the close to close 27.25. It was like all the sellers went home after the whatever deal was announced with MSFT. What it left at the end of the day was a really flat term structure.

The market hates uncertainty

Submitted by atg on Thu, 02/28/2013 - 7:44pm

As I write that little gem it was one of the first things I learned as a market maker. To be more specific what I learned and what I taught was as a market maker you make the paper pay for your uncertainty. If the tape is starting to go to a place you are unsure of, raise the volatility. That is a mantra I always go with. We spend a lot of time in the Option Pit Gold Courses trying to teach our students how to read the tape. The “tape” is the price and volume action in any particular time period.

BAC on more movement

Submitted by atg on Tue, 02/12/2013 - 5:51pm

One of our Pro Clients had a funny quote in the Pro Chat today. He said, "The S&P 500 is up today. You don't see that every day. Oh wait a minute, yes you do." In a nutshell, that is what we have, a market that is finding new ways to rally on news like the better deficit numbers and greater bank lending.

The AAPL volatility surface

Submitted by atg on Fri, 01/25/2013 - 4:12pm

The market is usually fickle about earnings. It is always a case of what have you done for me lately. AAPL is now no exception. When the future always looked brighter, the name would rally day after day. Now the stock is really in a tail spin. Instead of talking about $500 as a buy point, that number is $50 out of the money. That does not stop the AAPL faithful, and a look at the implied volatility after earnings in this case might be helpful.