VIX

VIX Option Premiums are Juicy

Submitted by msebastian on Mon, 05/20/2013 - 4:05pm

We all know the VIX has been in a range for some time.  This blog has on several occasions argued that it may be that way for a while.  Yet, even with the relatively stable and lower VIX traders have been pointing toward the 'vol of vol' for high option premiums.  This is a somewhat flawed argument.  Yes the VIX options do expire into a cash settle, but the real underlying is the VIX futures which are less volatile than the cash market even some of the more advanced programs look at HV in terms of cash VIX instead of the futures.

Based on how much things are moving around in the cash,   VIX option premiums are at some of the most expensive levels I have ever seen.  Take a look at the relationship of 20 day HV and 30 day IV in VIX options.

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Bond Vol Has Rebounded: HARD

Submitted by msebastian on Fri, 05/17/2013 - 5:48pm

10 Days ago we posted on this blog that bond volatility was completely in the toilet.  In fact, it was the lowest level we had seen in 2 years.  You can read the piece here.  We thought that the TLT might simply continue to drift lower.  In fact just the opposite happened.  Take a look at the pop in TLT Vol that we have seen in less than 10 days.

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Livevol (r) www.livevol.com

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ZNGA lives!

Submitted by atg on Wed, 05/15/2013 - 4:45pm

I want to characterize today with movement.  AAPL trades from 441 to 422, GOOG trades from 894 to 916 and PCLN from 789 to 808.  Stocks are moving again and I alluded to that yesterday that the realized volatility for names is starting to pick up.  VIX managed up .04 but really the story is that stocks are moving and the reason is money is coming back into the market. I think this means that things that really were not possible with positions most of last year are possible now.  You can buy some options and have a shot at making money.  Let’s look at a stock in the basement, ZNGA.

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VIX up and SPX up so is a crash imminent?

Submitted by atg on Tue, 05/14/2013 - 5:27pm

Memory is a funky thing in the market.  Right now many new investors and traders have the 2008 crash in the forefront of their minds.  I don’t blame them.  What we have had since then is mostly a declining volatility environment that has reared its ugly head on the big macro issues that faced us, namely the Euro and the US deficit.  Remember it was the 1-2 punch that set things backward in the summer of 2011 since it looked like a total failure by leaders to get a handle on the problems of the day.  Right now the trajectory appears to be better.  How do we know?  Every advance in fiscal prudence, even higher taxes, has been met with market rallies.  Bernanke was QE’ing back in the Fall of 2012 and the market did not really take off until the Fisca

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Crunch Time for May VIX Futures

Submitted by msebastian on Mon, 05/13/2013 - 6:35pm

When traders see a wide spread between the VIX and Front month futures they often get confused or even worried.  When in fact the opposite is usually true.  Last month with 8 days to go to VIX expiration the VIX closed at 13.19, the April VIX future closed 13.60.  A mere .50 premium to the cash.  The VIX future ended up settling at 15.64.  The month before that the VIX closed 11.56 (it’s lowest since 2006) the March VIX futures closed 12.95 on their way to a settle near 12.50.  Today the curve looks as such:

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www.vixcentral.com

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Why Won't the VIX Fall?

Submitted by msebastian on Wed, 05/08/2013 - 3:55pm

As the SPX continues its rally though 1630 and toward 1650, may a novice is asking why the VIX isn’t touching all-time lows.  The answer is simple: volatility

When the VIX got to its recent low realized volatility was in the toilet.  We had been through about 2 straight months of nothingness.  10 Day HV was near 5 and both 20 and 30 day HV were near 10%.  Looking at HV now we can see a clear difference.  10 day HV is closer to 10% and 20 and 30 day are actually trading at a premium to VIX.

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LivevolX (r) www.livevol.com

Bond Vol Getting Smashed

Submitted by msebastian on Tue, 05/07/2013 - 3:32pm

We have the market flirting with all-time highs again today and investors should be beginning to wonder if the financial crisis is over.  Asia looks ok, India ok, Latin America ok and the US recovering but in a pokey big government way.  Europe is still a basket case but that is mostly due to the reluctance of a good chunk of the population to work for a living and for the governments to stop paying for it.  At least short term the Euro should stay intact while the drudgery of budget discipline starts to happen.  While I won’t declare the financial crisis dead there is plenty of anecdotal evidence for that.  TARP was a success, Fannie and Freddie could pay back what they owe and home mortgage payments are now cheaper than rents

How low can the volatility go?

Submitted by atg on Fri, 05/03/2013 - 3:59pm

Somewhere between the ADP report on Wednesday and today’s NFP report the nation found a bunch of jobs.  The broader markets also found themselves in record territory with NASDAQ making at least multiyear highs.  What I find heartening (for bulls like me) is that the Treasuries are finally weakening with a near 3 point drop today.  If the rally has to continue folks need to stop running to no-yield bonds.  With better jobs news the need for the Fed to buy more is a much tougher case to make.  The thing is we have .75% gaps in the SPX still and while the realized volatility has tailed a bit we are getting one to two days a week of bigger moves.

VIX Term Structure Finally Normal

Submitted by msebastian on Fri, 05/03/2013 - 3:37pm

The last two weeks have been interesting for VIX and VIX futures watchers, for several reasons.  In relation to the VIX, the realized volatility has been above implied for about 2 weeks and appears that it might stay there for a while. 

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Livevol (R) www.livevol.com

The market seems to be okay with HV higher than IV as long as the move is higher.  This makes me uncomfortable, with overall VIX levels and has me convinced we do NOT see an 11 handle anytime soon.

So how is the VIX going up?

Submitted by atg on Wed, 05/01/2013 - 4:38pm

With the underwhelming ADP report the private sector is just limping along but improving slightly.  At some point here now that stocks are near all-time highs the residual of the financial crisis ending can only propel things for so long.  I mean that as earnings have climbed back up over the last 4 years stocks have had just fits and starts depending on larger macro issue (US debt rating, Euro, US Fiscal Cliff, Europe, Europe, etc) .  2012 was nice but 2011 was a wash as investors worried about the Euro.  Now  lower interest rates are powering stocks globally.  For some reason that is not enough to jumpstart hiring by companies.  My only guess at this point is the continuing government dysfunction is worryin

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