Friday, September 6, 2013

Aqumin Volatility Newsletter 09/06/2013 $VIX $SPY


Market still a bit jittery over Syria

The relatively predictable drop in VIX after the NFP today did not catch too many people by surprise. The real surprise was that it started to happen yesterday.

Note the change in implied volatility on the close Thursday in the OptionVision™ Landscape below. Pretty much all down the curve IV drifted lower. For the last several NFP reports that have been “taper sensitive” IV continued to stay bid well into the announcement. Not so this time, and the market might finally began seeing the writing on the wall going forward.

9-6-2013 1-57-45 PM

Note the action by midday. The second piece of overhanging news is still the situation in Syria. Usually when there is a cloud hanging over the market things move to a standstill. The market hates uncertainty and the little snippet that Putin was going to continue deliveries to his old pal Assad sent the market into a tail spin. The statement was later clarified but it gave the market a 1% in about 5 minutes.

9-6-2013 2-00-45 PM

This screen shot (above) is showing a little jump in downside skew for the SPY. As one piece of news comes out the market is still extremely sensitive to what goes on in Syria and we might not see any real movement until that resolves.

The IV should stay elevated until there is a resolution. A way to trade that would be a diagonal call spread OTM in the big indexes. The SPY is probably best since it is the most “stuck”. The market is going to sit around for a while but there will probably be one more panic in the meantime.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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