Thursday, April 18, 2013

Aqumin Volatility Newsletter 04/18/2013 - $SPY, $GOOG, $MSFT

Where is the Panic?

I am in Chicago this week and it has been raining cats and dogs since I got here. Rainy Chicago is kind of gloomy and that is an apt descriptor for the stock market this week. We started off with the Boston Bombing and the market has not been right since. The blog last week actually saw some upside skew flattening coming back into the market, but of course there was no way to predict what happened (although we did hedge a bit by picking a ratio spread and betting more on the gamma). The question now, is it just gloom or panic as we tick down to new lows for the week?

I have the OptionVision™ Relative Volume Landscape up and I have to say the action is underwhelming. Besides some of the IV leaking out in the near term from yesterday there is very little activity out of the ordinary. As a matter of fact we are downright inactive. The only activity that is slightly higher is in the May puts just out of the money (OTM). The volatility is only a hair up. That feels like more put sellers that own puts looking to exit. The IV is only up fractionally given we are down 1 (.7%) points in the SPY.

4-18-2013 3-05-53 PM

The market feels more gloomy than panicky and the volume seems to support that. A big part of the action could come to fruition after the earnings from GOOG and MSFT (web and desktop) tonight. I think this would be a better time to sell the recent pop in IV by moving away from the ATM. Think more like an Iron Condor. That way the trade is manageable on the off chance the gloom turns to panic.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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