term structure

The Vol comes out of the Vol

Submitted by atg on Fri, 06/07/2013 - 3:03pm

There was a lot of touchiness this week waiting for the NFP.  As it turns out the number was  ok even with the unemployment rate making a small uptick.  Stocks caught a bid and are starting the slow grind back of possibly regaining some of the highs we saw just a couple of weeks ago.  What is hard to believe is that VIX hit 18.6 yesterday early in the morning and it is now trading 15.49.  That is a more than 3 point drop from the highs.  It also says a lot about near term implied volatility.

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VIX Pressure vs Shock: Don't Be a Frog

Submitted by msebastian on Tue, 06/04/2013 - 3:41pm

The VIX futures are trading at their highest levels since the Italian Election debacle.  Yet the term structures are entirely different.  This is what the current structure looks like:

 vix_20.PNG

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Now compare that to what the VIX structure looked like at the end of the day on February 25th.

 vix_9_0.PNG

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This GMCR spread is a roastin’

Submitted by atg on Fri, 05/10/2013 - 2:30pm

Well the Yen is in the can, the Treasuries are dumping and everything that glitters is a dud today.  Stocks though are mostly mixed while the volatility market is about flat to slightly up in the VIX futures.  As a continuation of last night’s blog I think our summer will be the Zone of Unintended Consequences.  I don’t know in modern history if a currency has been able to debase it’s way to glory (see Zimbabwe, Brazil in the bad old days and of course Weimar Germany). Maybe this time it is different but the by looks of the other Asian markets today  they do not like the result.  Let’s get back to commodities and specifically coffee.

Gotta like this...

Submitted by atg on Fri, 03/01/2013 - 4:24pm

The market had a bit of a reversal on Thursday for what reason I cannot quite figure out.  Maybe politics but the economic news all week has been ok. Today there is the big shrug on the Sequester so maybe the politics will start to seep out of the market. One could hope. One name that took off on the close yesterday was Facebook (FB).  FB spent most of the day in the mid-26 level only to ignite on the close to close 27.25.  It was like all the sellers went home after the whatever deal was announced with MSFT.  What it left at the end of the day was a really flat term structure.

Is the Volatility Dead?

Submitted by atg on Fri, 02/01/2013 - 4:24pm

In the age of Twitter, I almost titled this “Volatility in Re-tweet.”   Sounds a little like Tweety Bird, but you get the idea.  With the NFP numbers out and Consumer Confidence numbers ok, the gravitational pull in equities is still up.  I think the volatility pattern in the SPY is telling of how the budget battles are going to shape up.  In short, I think the battle is over.

No pay for 3 months how about the last 18 months?

Submitted by atg on Fri, 01/18/2013 - 4:15pm

I don’t want to pooh pooh the rally we have had recently.  After 3 years or so of the governments from both sides of the Atlantic trying to “manage” the economy, some of the shackles are starting to break off.  Europe does not even make front page news anymore, as the Euro is making some short term highs.  Mario should thank Ben.  Most, if not all, of the economic data has been improving, as houses are selling, and most businesses are generating decent earnings.  With the super low interest rates and giant chunks of liquidity from the Fed the US is set to grow.  I don’t know what Ben is going to do with his big balance sheet, but I guess he will figure that out.  One stumbling block remains, and that is level of spending by the US government.  The

Fiscal Cliff 2, The Sequel?

Submitted by atg on Fri, 01/11/2013 - 5:30pm

With earnings season just getting underway the results look pretty good so far.  The SPX closed on a year high yesterday and we are .07 from doing it again today.  Without the din of structural implosion coming from the Fed and ECB the market finds itself wanting to drift up.  Super Mario has declared the bottom in Europe and won’t lower rates.  That was most likely a shot across the bow for Bernanke saying, “We got our house in order now how about you!”  That is trash talk Central Banker style. How is the volatility market handling that whole thing?

A screwy day for VIX

Submitted by atg on Fri, 12/21/2012 - 5:48pm

While there is posturing that normally goes on in Washington, then I guess there is another level of POSTURING when things get serious.  I am now beginning to think that Beltway politicians are the most overplayed relative to their work output.  I have not seen a lot of work output and they are all leaving for vacation.  I hear Nero’s fiddle playing in the background.

Is a Major Move in the SPX Upon Us?

Submitted by msebastian on Mon, 12/17/2012 - 3:53pm

Traders there are two very strange things going on in the option world right now.

1.  The HV IV spread is insanely insane.  With SPX IV trading at nearly 3X, realized volatility the market is pricing in options for a VERY big relative move in the near term.

SPX_4.png

Livevol (r) www.livevol.com

If we consider that, in order for the VIX to be this high and HV this low, expectations of a 1 or 2 day major realized vol spike must be the culprit.

This is further proven by our second strange thing, VIX term structure.

Demand for Gamma and Vega is Light

Submitted by msebastian on Fri, 12/07/2012 - 5:09pm

As we discussed on Tuesday, VIX was not just pricing in the cliff,  it was pricing in the non-farms that came out today.   While the December contract really hasn't moved since then, the Cash Index has come in considerably.  The curve closed the day basically back to normal contango, albeit a relatively flat contango. 

vix_8.PNG

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