straddle

SPY ATM Vol hits 7.5% 2 weeks out, Holy Guacamole Batman!

So yes you say IV is low but the realized vol is lower.  20 day realized vol is only 6.02% as the SPY and big brother the SPX extend the 80+ day run without a close to close 1% down move.  At this point the market is loving the DJT administration, tweets aside.  Straight up rallies are hard to diagnose but it appears that the steady mantra ofearnings, less regulation, lower taxes and more infrastructure is having quite a bubbly effect that the buy algos find quite tantalizing.

 

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AAPL Vol Was WAY Too Cheap Into Earnings

AAPL had earnings,  and whether you thought it was going up or down there is one thing that seemed off,  vol was low into earnings.  The AAPL straddle was prcing in a move slightly over 4$.  That seemed low to us at option pit.  Well...we were right take a look at where the 104/105 strangle went out that expires NOT just this Friday, but on Friday May 27th.  The straddle was about 60% too cheap or more.

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AAPL declares earnings and the market adjusts

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As I write this Greece defaults on debt to the IMF and sends its citizens into some uncharted waters.  The SPY is up .25 from the close so it is a safe bet for now that US stocks don’t care anymore.  The game is ending and is about to play out with a referendum this weekend.  It would not surprise me to see stocks start a rally again and end up at new highs after the labor reports this week.  Another surprise was the jump in AAPL IV on a down volatility day in the market.

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$AAPL EARNINGS MEH

Heading into earings tonight,  the market was looking for about a 5.50-6.00 move on AAPL earings tonight.  We know its somewhere in that range based on how the weekly strangles were priced at the close on earnings monday vs the prior monday.  The math is pretty simple with out all the extra mumbo jumbo.

Last Monday

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Earnings Monday (today)

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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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SPX Options Overly Discount Scottish Results

I agree with the consus and believe that in the end, the Scotts will do the right thing and vote to stay in the UK.  That being said, I think the market might have discounted that result a little too much.  Take a look at the SPX strangle that expires on the opening print tomorrow:

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Beware despots sending in aid

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It is funny I thought the Russians sending in aid a couple of weeks ago was a bit of a smoke screen.  Somehow the Ukrainian rebels got a new leg up.  The situation for them has gotten better since the white “humanitarian aid” trucks went in.  Fast forward to today.

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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.

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