weekend effect

My favorite blog of 2014- one of mine of course

As we come to the end of the year I thought I would put out my favorite blog of 2014.  It was a lesson on the weekend effect and how traders roll dates forward to pre-load time decay through the holiday.  As we are coming into the double barrel of Christmas and New Year I thought this would be helpful.  The short answer is selling options on Christmas Eve will not yield the dough one might think.

Realized vol is still high enough that selling short term options could get you in a heap of worry if the Santa Clause rally holds up.

Sometimes options are too cheap to sell.

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SPY IV is getting hit hard as Memorial Day is celebrated a bit early

The Fed whispered it is looking at raising rates and we rallied.  Why?  Because higher rates mean economic growth and that is ususally good for stocks.  The question is really more out into 2015 but still the Fed mandarins are kicking it around and we rallied.  VIX got hit.  IV got hit.  Stocks felt the love with another run at a record probably a day or two away.

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No Weekend decay today

Stocks made a little rally today on the good economic news in the morning.  Much of the early gains went away as the day wore on.  For what seems like the 5th time this week, the VIX cannot hold the lows of the day into the close.  As I write this, with 30 minutes to go today, the sub-14 VIX came and went with the slow deterioration of sentiment.

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What will the Fed do?

Thank you to all who attended the course on Saturday.

Overall today is a quiet day after the big NFP report on Friday.  Stocks are still moving in a positive direction with the SPY just .40 or so from an all-time high.  That begs the question, is time for the FOMC to take the punch bowl away from the party?

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The VIX IS Back in Contango..Or Is It?

The VIX cash is now trading at a discount of about .75 to the May future.  Does this mean all is well in the world of VIX, and that we can sound the all clear?

No it does not, while IV is certainly in today, the VIX cash is actually trading at about parity with the May future.  The weekend effect is distorting the current price.  You can read about weekend effect here.  Thus when we look at a VIX futures curve what is really going on?

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The Weekend Effect is in Effect for the VIX

Not long ago the SPX was sitting around 1350 right after the President got elected.  Now we sit 2 handles from an all-time high in the big index.  For those who bought the top in 2000 and 2007 you are looking sweet right now.  Reinvest those dividends and you still did better than a CD although the gray hair in the process probably counts for something.  And where is the public in all this?  Nowhere, that is where.  Liquidity is paltry by the standards of the retail investor.  A few are out there but besides the big financial news outlets no one really care

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The Weekend Effect is back so is the Deficit Crisis over?

One of the first things we try to convey in the Pit Report each day is what the volatility markets are doing.  There is always room to discuss a stock going up or down, but volatility study is one of the places we help our clients the most.  A day like today is the perfect example.  The reason being, of course, is what the numbers say, and what is really happening can be two different things.  For instance, the closing number on the VIX today was 12.58, up about .12 on the day.  At first glance, that is the volatility up slightly on a day when the market hit another short term high with the

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