SPY

The Greek Tragedy turns into a Comedy

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It looks like the Greek Drama happening overseas ended up being a comedy more than a tragedy.  That is good for investors and good for the Greeks.  We will revisit the issue in June but for now that looks like the only thing that was holding up implied volatility.

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IV goes into High Orbit

Stocks ended the week in an ugly fashion with the SPX down about 1.25%. There was enough in the bad sentiment train with Greece, Euro Area deflation, poor GDP and Russia annexing another part of the Ukraine. Not the stuff of rising markets with earnings only tepid this season. So far most companies that are reporting are doing better than estimates. Not 80% to blow it out but just ok.

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Draghi killed the VIX

The ECB finally announces a bond buying program of their own.  We will call it Euro QE.  At the rate the Euro is crumbling there won’t be much left of the bond buying program in dollar terms as the Euro rushes pack to parity with the US dollar.  Stocks love the QE since they takeoff after a whiff of it is announced.

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Stocks are in a ball of confusion, but not too much

I am not sure what the confluence of news was that made folks nervous but it seemed to be a combination of retail sales, no ECB QE and the latest weak data out of China.  That was enough to drive VIX into the 23 handle briefly and set the VIX future curve backward to Aug.  We did get a close of Jan VIX close Aug however.  The vol traders could not hold the Jan too backward overnight.  They could not push it lower however so a little more movement is still expected.

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The sell off lacks VIX

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2015 is starting off as the year of many swings.  For all the big daily moves in 2015, equities have not really gotten anywhere.  The post-FOMC rallies are fueled by the notion of lower rates and we run.  Then the sad realization of why we need lower rates hits and we sell off.  The only think I can say for this year is that the swings are solid and VIX is off the basement floor.

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So on the final day of 2014 the volatility rallies, really?

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With stocks ringing up another banner year the most unloved asset is making a move into the close.  No I do not mean oil.  That asset is volatility.  VIX is up 1.60 to 17.52 as I write this as players are getting very nervous moving into 2015.  The relative volume landscape tells a more enlightening story.

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Next Week's ATM Straddle is Too Cheap..AGAIN

Last Friday we wrote how the SPX ATM straddle was pricing in a level of around 34 bucks a spread,  this after the SPX had just ripped up 70 points or so.  At the time VIX was around 16.  Since then the market has ripped up higher a little over 35 points.  The straddle is worth close to 40.00 a spread.  Today, the VIX is down to below 14.50 after moving 35 points in 3 days.  With 8 full trading days to go, the SPX straddle expiring next week is pricing in under 33.50 dollars a spread.

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A new technical pattern emerges intraday- the VIX Grinder

No it is not a tasty sandwich from the Potbelly shop close to the CBOE.  It is a pattern we found in our chat room at the Option Pit.  Yeah, Yeah I know you will say it is a “wedge’ but pox on that.  It kind of reminds me of a sausage grinder.  Meat goes in and sausage gets spit out.  In fact one of our clients came up with that.  VIX kept grinding with the SPY and doing nothing really.

 

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Is this the revenge of William Wallace?

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So the Fed is leaning toward 2015 to start raising rates? There is not much different in that announcement as the Fed watchers look to parse all the of the twists and turns in the FOMC meeting minutes.  I think that after this long in our plodding recovery market players would be happy to see the Fed exiting.  That means things should be getting better, but that is just me.

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