For the first time since Weeklys were listed, at least that I can remember, IV is in the 6 handle or lower for all SPX Weekly options out a month. Well the Oct27 is 7.12 but still very low. At the money IV in the Oct02 cycle is 4.99%. Can it get lower?
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Stocks had a ho-hum day today unless your name is AAPL. The late afternoon bid for BHI by HAL might be a sign the oil services business is not dead yet. The Russians are making lots of noise in the Ukraine again but that did not stop the SPX from making yet another new high. It was a small high but a new high nonetheless.
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After a weekend of non-activity stocks got back to their old ways and launched this morning without so much as a how do you do. This latest Euro issue has been around since December apparently and Euro bank stocks were already trading at lower levels. Either way VIX and the volatility futures are tanking today and the only thing holding up the IV is the balance of earnings.
Records, records everywhere today as the major indexes posted new highs for the year. I don’t know what the headline rally was that got the buyers excited but there are some choices: first day of the quarter, POTUS goes around Congress on immigration, so-so economic numbers, Iraq is still a mess, etc. In short there was no good reason for the rally except that we are in a bull market as global economies shake off the financial crisis. It will probably stay that way for a while.
The Fed whispered it is looking at raising rates and we rallied. Why? Because higher rates mean economic growth and that is ususally good for stocks. The question is really more out into 2015 but still the Fed mandarins are kicking it around and we rallied. VIX got hit. IV got hit. Stocks felt the love with another run at a record probably a day or two away.
This is why we don't sell cheap straddles: We noted yesterday that AAPL IV was at extremely low levels into its earnings announcment today. Looking at a two year chart of AAPL 30 day IV one will notice this was the cheapest IV has been over that period of time.
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Today for the first time in a while the market closed on the low side of the day’s range. Selloffs happen all the time but it is fun to try to figure out what was the reason. Most of the information coming out today on the broader economy was pretty good. Jobs and manufacturing were both ok but the earnings were a mixed bag between LEN (good) and ORCL (bad). Ultimately with the market at highs it does not take much for it to sell off. Any reason is a good reason to sell if the market is trading at this level and you are long stock. That is just the no