SPX Implied Volatilities Making Some Sense Here

Traders that read yesterday's post may have noticed that the indexes (save the NDX) moved more than a 1 day standard deviation yesterday. If IV's held steady, we would probably end up moving more than one standard deviation today. But IV's have not held steady, the VIX is up about 9% although, in reality that's only 1.50 points, not something traders should get overly excited about. With the uptick in IV the front month straddle is implying a 1 day standard deviation of a little over 9 points now. This is pretty much in line with what is happening today and what happened yesterday.

Another note, the term spread between the April and May has tightened. Yesterday at the bottom of the VIX the IV spread stretched to over 1.7%. Today it is down to 1.1%. This is still a little high to sell April and buy May, but better than it has been. The short calendar has also lost much of its appeal.

What is the lesson to all you traders out there? Sometimes a trader's perceived 'edge' is only there for a few minutes or maybe a day or two. If a trader sees edge and hesitates for too long the market will quickly swallow the edge that was there. The reason: other traders see this edge too. The ones who are willing to jump at edge will get hurt every now and again. But, they are also the ones to reap its rewards.

I went back and looked at the 3 Cheap Ways to Play Goog and Bidu post I put up a while back. For once, a spec trade I pointed out worked. Of course I didn't put it on in paper as I should have, but I would invite you guys to take a look at what I was discussing.