The S&P 500 is in what appears another decent sell off. At the lows today, it was near levels that we saw in the sell offs surounding Greece. In fact, with another similar drop to today, the S&P would be right near that recent low close. Yet, take a look at the option market. While during the Greek Crisis VIX touched into 20, This time the VIX has barely touched 16 and does not seem to be a threat to get to 20 with out another bigger push lower.
So far this earnings cycle we have seen big wins in tech out of GOOG, NFLX, and no AMZN. Flops have come from AAPL, IBM, and MSFT. Take a look at the pricing of AMZN from today (now up about double the straddle price).
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Yesterday we discussed how the VIX might have gotten ahead of itself before the Greek vote. Considering the IMF statements, ECB, and all of the other Parlitment Reps talking in Greece, there is still SOME doubt that a deal gets done. Even though the deal will probably be signed, With SOME doubt the VIX should not have a 12 handle, especially considering China is still floating around. The market seemed to figure that out today after some premium sellers got ahead of themselves.
Greece has a deal, good or bad, there is some sort of deal. However it is not a done deal. The Greek Parliment still needs to approve it, and then alot of other details need to still be worked out. This might be part of the reason that S&P 500 rallied less than 50 points on the Greek deal over 2 days. Yet, the VIX has been utterly hammered. For a tiny rally, volatility has been completely smashed. Take a look at the magnitude of the move S&P 500 IV made relative to the actual SPX.
Today was certainly a rough day for the S&P 500. Like Clockwork it tested the lows from the day before, but managed to hold. With that the VIX exploded higher settling near 19.65. In fact the whole cruve is in backwardation through the August contract. But that doesn't mean there isnt trading opportunity. Take a look at the front of the VIX futures curve.