Bonds and VIX sending Conflicting Signals
Bonds and VIX sending Conflicting Signals
I am actually writing this post from the on the heels of yesterday's sell off. We are seeing some very interesting and contradicting signals from the equity markets:
VIX, while the VIX was up yesterday, it did not move as hard as the SPX fell. That said, it did have a nice little pop at the end of the day. At the same time we saw volatility on the options pop to near panic levels at close to 105% at 30 days to expiration.
At the same time TLT seems to be topping out and hitting resistance (the long bond) and volatility on bonds got completely crushed.
This signals that the market is not sure where it is heading. VIX is saying look out, TLT is bottoming out. My thoughts are that we have further to grind down but we may not see the ëpopí that many traders are expecting. In the end though, I have little clarity here and am not sure which way things end up this week.
The Trade:
Iron Condors seem like a decent trade here. When we do bottom out the bounce might be rough as we rally back. Another thing to note is WTI. As WTI rallies, there is a good chance that the SPX diverges from crude.
Images courtesy of Live Vol.
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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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