It is possible we are back to the days when the NFP numbers mean something. Stocks are more edgy lately as the intraday volatility picks up. The 16 VIX right now is justified on the touchy moves over the last 4 or 5 sessions. The bid for volatility today belies something else. I see some unrest potenital from PIMCO but I do not think that is it.
Bed Bath and Beyond had earnings on Wednesday and completely killed it. The options were also killed in a complete bloodbath of option volatility (thus the catchy title). However, I think this is the case of option traders getting a little overzealous in their attempts to sell premium. Take a look at this chart of BBBY stock and BBBY 30 day IV. What do you notice?
The market had its biggest drop in months. It below through the 50 DMA, and if things keep going it could threaten the 100 DMA if things keep going. Today, on CNBC I am sure the anchors are panicked. Yet, the VIX was up less than 3 points at the end of the day, despite the SPX closing on the lows. Why? Take a look at this chart of the SPX, 30 day IV and 20 day HV.
So the Fed is leaning toward 2015 to start raising rates? There is not much different in that announcement as the Fed watchers look to parse all the of the twists and turns in the FOMC meeting minutes. I think that after this long in our plodding recovery market players would be happy to see the Fed exiting. That means things should be getting better, but that is just me.
The VIX got creamed today as traders realized that the Fed is probably not going to be that big of a deal. Additionally, if the Scotts do what they should do, the VIX is probably going to go even lower. Looking accross the board IV got creamed in the SPX, NDX and DJX. It did not get smoked in the RUT which was the big underpeformer on the way up. Those that follow RUT know that underperformance is unlikely to last and that the index will POP higher if the SPX stays high (which it probably will). Thus, I think there mgiht be some real oppotunity to sell premium in RUT. Take a look at the price action of the RVX vs the VIX today:
Today, while the S&P was mostly unchanged, the VIX was up more than .80. When taking into account for weekend effect a little better than unchanged. Yet in many respects it should have been absolutely destroyed by the market. Why? Well take a look at where movement has been, in and out of meetings, in and out of economic announcements, and wars. Yet for some reason this Fed meeting is being treated as if there is some fundamental change occuring. Take a look at the HV/IV spread: