The vol of vol goes lower
There was a lot of touchiness this week waiting for the NFP. As it turns out the number was ok, even with the unemployment rate making a small uptick. Stocks caught a bid and are starting the slow grind back of possibly regaining some of the highs we saw just a couple of weeks ago. What is hard to believe is that VIX hit 18.6 yesterday early in the morning and it is now trading 15.49. That is a more than 3 point drop from the highs. It also says a lot about near term implied volatility.
Looking at the VXX in OptionVision™ this afternoon. Note how the red Option Landscape is even redder in the downside puts. Usually puts trade cheap in the VXX because they are not the panic securities, the calls are. The put holders today had to get out as the VXX traded from 21 to just 19 this morning. VXX holds the front two month VIX futures so activity in here is a good proxy for future volatility.
Right now, the market for the volatility of volatility got smoked. Usually I take that to mean there will be less volatility going forward at least in the short term. Generally VXX has a problem with decay which puts pressure on the product and now with big news like the NFP out, there will be even more pressure here. The liquidity providers took down the IV because they expect more option selling so don’t be surprised if you see lower levels in the VXX over the next week.
OptionVision™ – data from ORATS
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