volatility

VIX Continues to Hold Firm

Yesterday,  SPX down 12,  VIX up 1.6 points.  Today,  SPX up 11,  VIX down .6.  This points toward a continued ramp up in volatility and fear in the market that is complex enough that the media aren't picking up on it, but simple enough that most traders see what is going on and are not wondering if,  but when.  Well, based on the action today,  I would say soon.  Below is a chart of VIX and SPX.  Concentrate on the 50 DMA (the red line)

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VIX IV Continues to Be Silly Cheap

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Since the end of the congressional stand off, the VVIX (the vol of VIX) has done one thing: plummet.  For a brief period, VIX vol hit periods in the 50's,  levels not since these options listed in the mid 2000's.    Take a look at how low 30 day IV has gotten in VIX optoins.

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VIX is Overpriced

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SPX, VIX Spinning Wheels...to Where?

There are two main ways to correct.  One comes with a drop in the underlying price of the market.  This is something we saw in June when the market fell over 5% from the top.  The other is a time correction, a time correction is typically when stock or index sits in a range, while its IV sits, then the stock begins to rally after a period of time.   In a holding pattern, when IV rallies,  typically there might be a sell off.

Right now,  the current SPX holding period does not look like a sell off, the VIX is in a holding pattern along with the SPX.

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TLT IV's Seem Too Cheap

It appears that the movement in the 10 year note has stopped being completely crazy.  However, this does not mean that movement has stopped all together.  In fact the 10 year and 30 year are both moving at a nice clip on a daily basis.  The 14 day ATR on the 10 year is still WAY above where it traded before the ‘taper talk’ began.  Looking at ETF’s that ATR of TLT is about 1.25 a day over the last 14 days.  Yet, take a look at the 30 day IV chart of TLT

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Trade in Ford from Bloomberg TV

Our COO discussed, remotely from Detroit a trade in Ford Motor Company today.   Watch the video here:

 

The basic jist of the trade is that the stock is at a 52 week high, and while IV is also elevated in the earnings months, it is not especially high ahead of earnings.  July12 and July20 are both somewhat cheap and have a flat term structure.  

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SPX Average True Range Is Elevated

There are plenty of people who do not love GARCH HV measures.  I am one of them.  However, they are still good for showing clear examples of how much the market has been moving.  An even better volatility study though is Average True Range or ATR.  Currently 14 day ATR in the SPX is over 20.  That is SKY HIGH.

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Graph from thinkorswim

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Bond Vol Has Rebounded: HARD

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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Why Won't the VIX Fall?

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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SPX Realized Volatility vs. VIX Spread is Insanely Insane

One of the things talking heads are constantly pointing to is the low VIX.  It is 'complacency' they say, because that is a buzz word.  The fact of the matter is the VIX is not cheap; the VIX is trading at a HUGE premium to current market volatility.  Take a look at this spread:

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