realized volatility

Will the low realized volatility stay with us forever?

I like working at Option Pit with Mark Sebastian and I like our clients.  Well one it is fun, most of time, and we have great clients.   From time to time we get some solid observations from them.  That is another thing I like.  Having a different perspective from traders you have helped educate usually means some interesting stuff know the foundation is solid.  So I am giving one of our clients some props here for this one.  He  knows who he is.

Note that when realized volatility dips below 5% on a short term basis it usually does not stay there for too long.  I have 10 day RV down around 5.41%.  Right now the first 3 Weekly terms in the SPX are all below 9%.

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Stocks are bending but not broken yet

Thankfully you are not a Russian IRA holder right now.  Normally when the USA invades stocks are in a state of suspended animation and then they pop. Historically that is what happens.  If the Russians invade Ukraine I am not so sure the same thing will happen.  The RSX will probably sell off another 2 or 3% easy.  Stocks here will sit in limbo to slightly lower.  We have recent history of the RSX and SPY to confirm that.

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Hello, Avon Lady

A dead day is a dead day.  And today the market is living up to its low volatility number by putting in a .14% drop today.  That is hardly enough to register on the VIX-o-meter.  Any little blip in activity stands out more on a day like today.

Note the activity in the AVP Aug 13 puts.  Paper bought a big block of puts and most likely this was tied to stock.  As we move forward earnings are usually on the 1 day of August in AVP.  This is pretty early in the earnings cycle to buy a big chunk of juice.

 

3D volume charts by OptionVision

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VIX has its revenge

With Syrian warplanes getting into the mix stocks took a slight pause today.  Between Syria and Iran the ISIS militants have found a more able adversary.  Early in the session the NDX was moving into some lofty ground but by the end of the day started to head into negative territory.  The only names still up were Treasuries and the volatility products.

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Is PLUG back from the dog house?

The Fed is staying the course and winding down their bond buying program.  We have some higher short term rates but lower long term rates on the horizon as growth is better but still slow.  That is exactly what the Fed wants.  Slow and steady wins the race and for now stock like the news.  Maybe we can catch a bit more rally if we can put the Middle East genie back in the bottle.  For now VIX is taking a thumping as the good economic

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VIX is well priced for now

As I write this the AAPL WWDC is going full tilt and the stock has not been able to hold up for most of the day.  Granted it had a near $40 run up last week, $606 to $642, so a pullback is not out of the cards.  That run also helped push the SPX to record highs on not the greatest news in the world.  Part of that run is helping to damp down the volatility a bit in the big indexes of which AAPL is a part.

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Vol of Vol bottoming out?

I am fresh from a webinar for TradeMonster entitled “Trading in a Low Volatility Environment”.  It was good to have so many questions about the alternative trade setups.  The big takeaway of course is that a trade set up when vol is cheap has a certain character.  With the VIX staying comfortably below the 12 handle we certainly are that.  The surprise of course is the economy can contract and we rally to all-time highs.  I guess paper wanted to buy the recession dip due to the bad weather.  From what I can tell global cooling is a lot worse on the economy than global warming but good for stocks.

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Cage match in the NDX

Stocks briefly flirted with new highs today, but look like they will close up for the day.  Slightly better housing news with a non-reaction to Thailand or Ukrainian violence also got the VIX to a 12 close.  I am not saying stocks can't drop, but the case for up to flat is getting better.  Part of the VIX is to forecast volatility in the future and for now there isn't any.

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Is the Biotech slide done?

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Stocks posted a slight gain today as the RUT stopped its slide somewhere midday.  The short jump we had in volatility ended with the VIX closing 12.44 down .73.  Without a reason to rally like early in the week, if there was one, stocks are on a meandering path for the short term.  The talk of European stimulus is not giving the market the same gas it did last year or the year before.  At this point, with earnings at the high end, companies need to make more money and for now that is a high hurdle.

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The bond rally no one saw coming

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We had a nice selloff today as thoughts of deflation gloom spread over the market.  Just remember that even in a bull market there are going to be down days  and some flat out ugly days as investors and algo guys read the latest headline and hit the exit.  Today was just one of those days.

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