term structure

Was VXX invited to the party?

One too many mediocre earnings reports sent stocks swooning coupled with a “tough love” shout by one of the Fed bigwigs.  The simple reason is that stocks have run and the reasons to keep buying them are less compelling.  The big slowdown from the winter deep freeze keeps showing up in company earnings as many folks in the Midwest eastward stayed home and burned fossil fuel.

charts by www.Livevolpro.com

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TWTR volatility gets whacked as bad as the stock

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For a brief second today stocks were starting to look good.  It was better than a second, it was more like most of the morning into early afternoon, then the sadness came.  Sadness came to TWTR on Tuesday and there was a bit of a let up today.

Note that vol. across the term structure got savaged by the close today.  IV in June traded into the 50 handle and near term IV was down 15 points.  What does that mean?  Most likely there will not be a parabolic bounce in the stock.

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The Term Structure is starting to break

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The Fed surprised no one and is continuing to taper out of their bond buying program.  While the real benefit will be endlessly debated, stocks have had a hard time making a whole lot of headway since the reductions started in earnest in Jan 2014.  The 1-1.5% upside gaps seem to be a thing of the past unless stocks have come of a bottom.

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The Next Internet Craze

Well, maybe not the next internet craze, and no this is not the title of the next Michael Lewis book.  The craze has already come and gone.  I like looking at new products and this KWEB (KraneShares CSI China Internet Trust) is interesting in that it has flown under the radar for a while.  No options trade on it, (hint: CBOE list them!) but the product moves around pretty good.

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Quien Es Mas Macho? NFLX or EEM

So the Friday rout in volatility did not materialize.  Stocks dutifully opened higher with VIX marking lower, and then everything went the other way.  Today the big premiums we saw in VIX futures got chewed up as VIX Apr closed just about flat with the VIX cash.  The VIX line in the sand at 13% is holding much better than Kaddafi’s Line of Death, and seemingly for months longer.

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Someone called the top in the growth stocks

Following up on Friday’s action we did get a little pull back in the index skew today.  VIX is in a touch and most of the vol. ETP’s might be even or down a touch with the market rolling in down .3%.    There still feels like something is brewing out there, but I cannot put my finger on it.  Gold is getting trounced since Ms. Yellen is looking more hawkish than dovish.  Who knew?  T-bonds are still clinging to some near term highs and that always gives me the heeby geebies until the shoe drops.

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This time the Fed ain’t saving you

Thank you to all those who attended our Bear Market Trading seminar. Look for the March Seminar topic coming soon!

The Fed is continuing the modest tapering of bond purchases and thankfully ignoring the machinations in Turkey and Argentina. A stronger statement of course would be that they taper 20 billion instead of 10 billion.  There were some hopes that maybe with stocks lower that they would ride to the rescue.  That did not happen.

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VIX futures pick up a bid

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VXX short term IV is hitting lows

As 2014 continues with the not much happening award, there are some big mark downs going on in the volatility markets.  Stocks are sitting around, but volatility in the volatility products are hitting some very low levels.

Take VXX turning in 38% implied volatility with NFP still to come on Friday.  It feels like paper has all but taken out the possibility of a move in VXX for this week.

 

LivevolX (r) www.livevol.com

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