time spreads

Did the FB options out price the earnings?

Submitted by atg on Wed, 01/30/2013 - 6:15pm

The big surprise today is that the economy shrank in the 4^th quarter of 2012. The market did not really care most of the day, as the SPX traded a near term high of 1509.54. The fact that the government is starting to reduce its influence on the economy is probably for the best. If we get out for just modest declines in GDP, that will bode better in the long term. Take the short term medicine now versus a big slug in 4 years. What I think this does is draw a picture of lower realized market volatility for a while. It might not stay at 4% like it is but it could stay in the low 10’s. That brings me to the Facebook trading.

The Volatility Blip in Facebook

Submitted by atg on Tue, 06/26/2012 - 7:52pm

I figure, by the time Congress tells Wall Street how to price IPO’s because of the Facebook slide, the name will already be trading $40. Then, of course, the whole conversation will be moot. It is one of the rare funnies on CSPAN to catch that kind of testimony. I can just picture the questions now, “How come you did not charge less for the IPO, the customers would have been happier?” Not the investment bank customers, mind you, but FB is starting to heat up again as is the way with names that have hyper growth potential.

Rallying to the Bottom

Submitted by atg on Wed, 05/16/2012 - 5:28pm

Monday I wrote my “Backwards is no Bueno” post about the unusual action in the VIX futures and how the cash briefly backwardated with the soon to expire VIX May contract. That activity is not very good for the market, mostly because I think it show some nerves. Traders, rightly so, look around and see a little more uncertainty and price up SPX options. Sometime that push over comes the normal premium in the futures, as it did for a while on Monday. The slides below tell a continuation of that story. For longs, it is not a great one (even AAPL got smoked today).

VIX activity is starting to feel troublesome

Submitted by atg on Wed, 05/09/2012 - 6:12pm

More bad news from Europe, since the Greeks cannot get their act together on forming a government. It seems they do not want to beholden to the Germans and French. If they leave the Euro, I think, the Greeks will wish they were. This bailout thing that started in the mid-90’s with Mexico, went to Asia, then Russia, and now finds itself in Europe is becoming a real pain. The rule is countries cannot borrow and spend in currencies they cannot control.

AAPL closed up a quack, now what to do and did you see the run on vol

Submitted by atg on Fri, 02/10/2012 - 6:42pm

In the old fraction days, a Quack was slang for a ¼ (.25 for those opposed to fractions). As in, I will buy those for “a buck and a quack”. Yes floor traders really said that, and I still have piercing voices in my head of manic market makers screaming “at a quack”. Well, that was all AAPL could eke out today. The nice thing about a ho hum day in the underlying is that the options still trade, and AAPL traded with 441706 contracts. Numero Uno for equity option volume and twice the daily average contracts traded. Everyone is now piling in.