Friday, January 9, 2015

Aqumin Volatility Newsletter 01/09/2015 $SPY $SPX $VIX

No oomph to the selloff

2015 is starting off as the year of many swings. For all the big daily moves in 2015, equities have not really gotten anywhere. The post-FOMC rallies are fueled by the notion of lower rates and we run. Then the sad realization of why we need lower rates hits and we sell off. The only think I can say for this year is that the swings are solid and VIX is off the basement floor.

Even on a down day stocks cannot muster up a big move in volatility. Why? I have VIX up .42 as I write this as stocks are down around ¾%. That is an underwhelming move for VIX as it should pop around 7% for every 1% drop in SPX. Note in the OptionVision™ Volatility Landscape that the only options that have a jump in IV are some upside calls in the near term. The sea of red is a decline in strike IV across the SPY. VIX up but IV down per strike is always curious.

1-9-2015 1-50-53 PM

There is not a lot of heft to the selloff, if we use volatility as an indicator. VIX got near even for the day at some point. The reason being is that VIX is already pricing 1% daily moves. If they don’t come for the downside, I expect we will bounce next week. There is some weekend effect holding down VIX but usually worry will overtake the decay factor. The trades I like have been upside flies in the indexes, say SPX, with a junk protect put just in case.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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