Friday, November 22, 2013

Aqumin Volatility Newsletter 11/22/2013 $VIX $DXM $SPX

Barking Dogs

So the big new is that the Dow screamed past 16000 yesterday. Screamed may be a bit too aggressive of a word but that is a new number. I believe the SP 500 will hit 1800 in short order to complete the twofer. In the meantime look at how that has changed the realized volatility in the OptionVision™ landscape below.

Note that most of the stocks have 10 Day HV’s below the 20 Day HV’s. Those would be red to white colored names below on the left side of the black lines I drew. The market for stocks over the last week has been mixed to mostly positive as well. The recent rally has sent the near term realized volatility lower, and that is why we are seeing very low numbers for VIX and other implied volatility indicators.

11-22-2013 9-50-58 AM

Cheap volatility also brings opportunities. Look at a name like DXM. It was a social media marketing darling at one point this year, trading in the 20’s before dropping to the 4 handle. Bull markets tend to give individual names a bit more gas when some good news comes out. To trade a name like DXM, I would look to buy a ratio call spread (sell 1 call and buy 2 OTM) in a farther out cycle for even or better. There should be lots of dogs barking again come the spring. The ratio spread protects in case the dog goes quiet.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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