SPX

VIX Traders Are NOT Impressed

Submitted by msebastian on Fri, 05/24/2013 - 3:33pm

The news on the networks is that this is the 1st down week in some time for the SPX.  All told the SPX gave away a touch over 1% and was down over 2% at certain points.  Yet the VIX has barely rallied and the June VIX futures haven't moved.  Take a look at this graph from VIXcentral.com:

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www.vixcentral.com

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VIX Option Premiums are Juicy

Submitted by msebastian on Mon, 05/20/2013 - 4:05pm

We all know the VIX has been in a range for some time.  This blog has on several occasions argued that it may be that way for a while.  Yet, even with the relatively stable and lower VIX traders have been pointing toward the 'vol of vol' for high option premiums.  This is a somewhat flawed argument.  Yes the VIX options do expire into a cash settle, but the real underlying is the VIX futures which are less volatile than the cash market even some of the more advanced programs look at HV in terms of cash VIX instead of the futures.

Based on how much things are moving around in the cash,   VIX option premiums are at some of the most expensive levels I have ever seen.  Take a look at the relationship of 20 day HV and 30 day IV in VIX options.

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Bond Vol Has Rebounded: HARD

Submitted by msebastian on Fri, 05/17/2013 - 5:48pm

10 Days ago we posted on this blog that bond volatility was completely in the toilet.  In fact, it was the lowest level we had seen in 2 years.  You can read the piece here.  We thought that the TLT might simply continue to drift lower.  In fact just the opposite happened.  Take a look at the pop in TLT Vol that we have seen in less than 10 days.

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Livevol (r) www.livevol.com

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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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Crunch Time for May VIX Futures

Submitted by msebastian on Mon, 05/13/2013 - 6:35pm

When traders see a wide spread between the VIX and Front month futures they often get confused or even worried.  When in fact the opposite is usually true.  Last month with 8 days to go to VIX expiration the VIX closed at 13.19, the April VIX future closed 13.60.  A mere .50 premium to the cash.  The VIX future ended up settling at 15.64.  The month before that the VIX closed 11.56 (it’s lowest since 2006) the March VIX futures closed 12.95 on their way to a settle near 12.50.  Today the curve looks as such:

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www.vixcentral.com

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Why Won't the VIX Fall?

Submitted by msebastian on Wed, 05/08/2013 - 3:55pm

As the SPX continues its rally though 1630 and toward 1650, may a novice is asking why the VIX isn’t touching all-time lows.  The answer is simple: volatility

When the VIX got to its recent low realized volatility was in the toilet.  We had been through about 2 straight months of nothingness.  10 Day HV was near 5 and both 20 and 30 day HV were near 10%.  Looking at HV now we can see a clear difference.  10 day HV is closer to 10% and 20 and 30 day are actually trading at a premium to VIX.

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LivevolX (r) www.livevol.com

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.

VIX Term Structure Finally Normal

Submitted by msebastian on Fri, 05/03/2013 - 3:37pm

The last two weeks have been interesting for VIX and VIX futures watchers, for several reasons.  In relation to the VIX, the realized volatility has been above implied for about 2 weeks and appears that it might stay there for a while. 

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Livevol (R) www.livevol.com

The market seems to be okay with HV higher than IV as long as the move is higher.  This makes me uncomfortable, with overall VIX levels and has me convinced we do NOT see an 11 handle anytime soon.

Same VIX, Different Message

Submitted by msebastian on Mon, 04/22/2013 - 3:20pm

One topic that consistently confuses people is VIX curve structure.  It’s not just the level; it’s the slope that matters.  Let’s look at two curves with very similar underlying VIX prices.  I the difference might be more clear.

On March 21st, 2013 the VIX closed at 13.99, a mere .30% lower than where the VIX is trading.  Also a very similar number of days to expiration across the different contract months relative to where we are trading today.  Notice the slope of the curve in the front two contract months:

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www.vixcentral.com

The VIX IS Back in Contango..Or Is It?

Submitted by msebastian on Fri, 04/19/2013 - 1:31pm

The VIX cash is now trading at a discount of about .75 to the May future.  Does this mean all is well in the world of VIX, and that we can sound the all clear?

No it does not, while IV is certainly in today, the VIX cash is actually trading at about parity with the May future.  The weekend effect is distorting the current price.  You can read about weekend effect here.  Thus when we look at a VIX futures curve what is really going on?

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www.vixcentral.com

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