Monday, April 7, 2014

Aqumin Volatility Newsletter 04/07/2014 $SPX, $VIX, $SPY

The volatility drop that wasn’t

The stock market looks like it has had enough of tepid jobs reports. There were big hopes of 275k jobs or so but all of those hopes were dashed today. The happy number was private payrolls are back up to the pre 2008 crash highs. I guess that means government payrolls are not, but somehow we are spending a whole lot more money than we were back then. Either way stocks were a bit grumpy about it.

As I sit now the SPX is down around 21 points but 30 points from the run it made for 1900 when it stopped short at 1897.28. That is almost a 2% move but the VIX is only up a whopping .83 right now to 14.82. After spending the open in the 12 handle, VIX pretty much drifted up for the rest of the day. The curious thing is that IV ATM is barely moving. While the VIX is meant to increase on a drop in the market, it does need a jump in IV to really make it hop.

4-7-2014 10-42-13 AM

As you can see from the OptionVision™ Landscape there was a jump in the skew, barely, but hardly a whiff of IV jump At the Money (ATM). I don’t think the market players are taking this jump very seriously. This is probably a good chance to sell a 30 day or less broken wing butterfly on the downside in the SPY or large index. The non-vol. response is telling on a day when IV should be jumping.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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