SPX IV at a Turning Point
SPX IV at a Turning Point
When the VIX broke through 42% Friday morning, prior to Ben Bernanke's uneventful speech, I heard several of my students discuss how it had hit a 'triple top', as if high option volatility has any form of technical analysis that can be applied. However, itís what occurred after the announcement that interests me more. Vol got smoked right back to where it was on its lows of Monday:
What makes this interesting is that this is kind of a 'triple bottom' now. On several occasions the VIX has threatened to break below 35% and stay there, but has been unable to do so thus far. On Monday, with the weekend affect, the VIX should trade about 36.25%. If the market is up on the day or unchanged and VIX can close below 35%, I think that may signal some upcoming calmness. I fully expect some sort of EU agreement to fall into place (stupid Finland) in the coming days.
With Labor Day approaching, I would be shocked if we didn't see some green eye premium sellers enter the market as well. I would expect a full on premium assault, if the employment report wasnít on Friday. Still, I would be surprised if we didnít see the market threaten 1200 again early next week. If ADP is bad, that could cause a hurdle, but those numbers have been so off itís hard to pay attention anymore. IF and that is a big IF, the employment report is over 150k jobs and there is no growth in government, I think we have a legitimate shot to break 27% in VIX. Even if itís simply in line, I think the VIX falls below 30 and futures de-backwardate (is that a word) by Friday.
Images courtesy of LiveVol.
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Mark Sebastian is the Director of Eduction for Option Pit, and a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. He has been published in nationally on Yahoo Finance, quoted in the Wall Street Journal is a featured contributor for TheStreet.com. He also writes regularly for SFO, and OptionsZone, and is the managing editor for Expiring Monthly: The Option Traders Journal.
To learn more about Option Pit and its mentoring services, please visit OptionPit.com
Mark Sebastian is the Director of Eduction for Option Pit, and a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. He has been published in nationally on Yahoo Finance, quoted in the Wall Street Journal is a featured contributor for TheStreet.com. He also writes regularly for SFO, and OptionsZone, and is the managing editor for Expiring Monthly: The Option Traders Journal.
To learn more about Option Pit and its mentoring services, please visit OptionPit.com
About Mark Sebastian
Mark Sebastian is a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. Along with his role directing the path of education for Option Pit, Mark is currently the director of risk for a private hedge fund. He writes a daily blog, the Option Pit blog, formerly Option911. Sebastian has been published nationally on Yahoo Finance, Google finance, Financial Times Alphaville and is a featured contributor for TheStreet.com. He is also published regularly at SFO, the Options Insider, and is one of the Co-Hosts of The Option Block Podcast, a featured Podcast from Options Insider Radio. Mark is the managing editor for Expiring Monthly: The Option Traders Journal. Sebastian has a Bachelor's in Science from Villanova University.
To learn more about Option Pit and their mentoring services, please visit: http://www.optionpit.com
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