Friday, June 28, 2013

Aqumin Volatility Newsletter 06/28/2013 $SPY

The Weekend Effect is coming early

As the market prepares next week for a slew of economic data, there is one thing on the calendar that is a known quantity. That is the fact that next week trading will get curtailed by a day and a half. So liquidity providers have to stuff 3.5 trading days into 7 total (including the weekend) calendar days. I think they have started early.

If you look at this OptionVision™ snap from the close Thursday, the cycle expiring on July 5th has had the volatility knocked out of it more than its Weekly cousins. By taking down the implied volatility the liquidity providers effectively take out some of the decay of the options. They can only do this of course if there are no buyers on balance. And that is the surprise really, since the economic numbers have been providing pretty good activity of late.

6-28-2013 3-49-47 PM

I still think the market has plenty of move left in it now that the thought Q Easing is going to slowly chip away the value of the Bernanke put. Buying premium into the weekend or Monday will only have a fraction of normal theta. A trader in a sense gets some time for free. The idea of a trade would be to buy near dated straddles at this reduced rate and see where the market takes us. I am pretty confident it won’t be SPY 161.


OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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