The VIX Bought the Rally Yesterday
The VIX Bought the Rally Yesterday
I was trying to find the really good news yesterday for the rally but I think it was more an absence of bad news. Some decent bond action in Europe (watch those auctions) with lower rates so the market took that as a message the ECB is still out there to help. The hard earnings news has not hit (besides GOOG after the close) yet so there was little to keep the VIX at its closing level of 20.02 yesterday. As my colleague pointed out there was pop in IV yesterday in the big indexes so the market was not quite ready to buy the action.
Note the chart of the VXX below and you will see good reason to wait and pick a selling point in the volatility products. We have been holding off jumping back into selling the VXX (the deliciously self- consuming ETF) until there was a ìbreakî. I, like many of you, do not wish to catch a falling knife which in this case (since we are selling) is more like stopping the pongee sticks coming out of the floor in an Indiana Jones movie with your face. Wait for some gravity to take effect.
Charts by TOS (www.thinkorswim.com)
Further confirmation in the SPX by a nice, big drop in implied volatility. Note the tail off below as the IV30 for the SPX was down 11.7% today. The intraday volatility of the VXX is still wooly so there was plenty of time to jump on the bandwagon today.
The equity market feels like it wants to go up even on the days it doesnít. A VIX of 15 or so feels a bit better as that seems to be the new floor and we most likely will keep bouncing off of it until Europe can restructure. Other than that wait for earnings, and if they are any good, as they will be the next IV killer.
Charts by LiveVolÆ (www.livevol.com)
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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
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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