A Reversal of Risk
It looks like the Greek Drama happening overseas ended up being a comedy more than a tragedy. That is good for investors and good for the Greeks. We will revisit the issue in June but for now that looks like the only thing that was holding up implied volatility.
The OptionVision™ landscape shows an interesting pattern for change in the term structure in the SPY. Essentially the back month terms are dropping in response to the ECB/Greek news but the near term upside is catching a slight bit. This means market participants are looking for IV to drop in the long term but are still wary of a move to the upside in the short term.
I don’t blame them. Stocks have had the wind at their back since the low rate regime set in around 2009. The slowness in Europe gave the Fed a reason to wait on the rate hikes and stocks will love that. That is what the end of day term structure says today. Index Iron condors look like the rage again since most of the news is out. Go 60 days out to catch the last gasp of volatility in the market but keep the deltas flat.
Read more from Andrew at Option Pit