It Feels Like Deja Vu All Over Again
It Feels Like DÈj‡ Vu All Over Again
That is one of my favorite Yogi Berra quotes. (Did the guy ever have a bad one?) Speaking of bad ones, the VIX over the last 3 sessions has had some substantial intraday volatility that the rest of the equity market activity is masking. Note the chart below as there was a hidden 10% move up in the VIX during the day only to be followed by the abrupt sell off. This looks remarkably similar to the action on Friday that Option Pit highlighted in this blog. You donít like the volatility index level, just wait a while and it will come crashing down. What I do find interesting is that this panic attack due to a bunch of Greek politicians not doing anything did not get the same level of melt up as we saw Friday. That is somewhat heartening.
Still these shocking moves give one pause. The chart below of the volatility of the VXX intraday gave February a big shot in the arm and was probably the best chance for a nice time spread. What seemed a lock on Monday for a Contango laden close lower on Friday for the VXX seems to be a bit in doubt at this point. The VIX futures really belted this ETN around today.
The Trade
Mind the news tomorrow and keep an eye on the VIX after settlement. The action in the Mar future should lead the action in the VXX. Maybe this little time spread anomaly happens again and traders should be ready to pounce on it. The Greek implosion keeps on trucking.
These volatility products are for experienced traders and users should be mindful of the risks. Consult your financial professional.
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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 is co-host of "Option Block," the wildly popular show on The Options Insider Radio Network.
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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