This page has been archived and commenting is disabled.

And For That Flashy Crashy Smell, Here Are Surging Vol And Implied Correlation

Tyler Durden's picture


You can look at the Dow which is hilariously green on the day despite the now doubly confirmed contraction of the US economy. Or you can look at the VIX which is now surging in what can be classified as an offerless market, and up well over 10% at last check. NYSE Circuit breakers now off.

And just to make sure that the market has that fresh Flashy Crashy smell to it, here is Implied Correlation.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 06/16/2011 - 14:59 | 1375426 slow_roast
slow_roast's picture

As The World Burns

Thu, 06/16/2011 - 15:31 | 1375566 Conrad Murray
Conrad Murray's picture

Beware my friend, shit winds are a-comin

Thu, 06/16/2011 - 16:11 | 1375684 Jason T
Jason T's picture

hope they don't shit on you..

Thu, 06/16/2011 - 15:00 | 1375432 francis_sawyer
francis_sawyer's picture

Margin rate hike coming in 5...4...3...2...

Thu, 06/16/2011 - 15:03 | 1375444 George the baby...
George the baby crusher's picture

Now why would you say that :-) ?

Thu, 06/16/2011 - 15:05 | 1375433 redpill
redpill's picture

Say some of the large players wanted to create a lot of uncertainty and borderline panic in the market so that they could get the Fed to do QE3 and keep the gravy train rolling.  This is about what that would look like, I'd say.  Mid-day swoons, crushing the confidence of the smaller fish, etc.

Thu, 06/16/2011 - 21:52 | 1376415 Ned Zeppelin
Ned Zeppelin's picture

Nope - game theory is the Decent Interval must pass before QE3, during which stocks take a beating.  However, the hoped for effect when QE3 is announced may not happen. Call it the "Cry Wolf" problem of decreasing effectiveness. Gold will of course advance nicely at that time. 

Thu, 06/16/2011 - 15:05 | 1375436 No Bid
No Bid's picture

Not using SKEW anymore?

Thu, 06/16/2011 - 15:07 | 1375445 Tyler Durden
Tyler Durden's picture

No need when plunge risk is imminent. And also more relevant for Pin risk ahead of quad witching tomorrow (for reference see Cashing post earlier).

Thu, 06/16/2011 - 15:34 | 1375557 Josh Randall
Josh Randall's picture

Things are looking up can't you see ? Time for LIESMAN to gloat some more, and the hit the Shoney's dessert cart for the fourth time

Thu, 06/16/2011 - 17:39 | 1375922 MikeNYC
MikeNYC's picture

Trying to translate this into human:

1. rocketing VIX = "shitstorm a-comin"

2. Climbing Implied Correlation = "everything's going into the crapper together"

Did I get that right?

Thu, 06/16/2011 - 15:03 | 1375441 Cognitive Dissonance
Cognitive Dissonance's picture

I love the smell of panic in the afternoon.

Thu, 06/16/2011 - 15:10 | 1375476 TruthInSunshine
TruthInSunshine's picture

Flashy crashy panic is the most fragrant kind.

When markets shart, bring out the glade, bitchez.

Thu, 06/16/2011 - 15:03 | 1375443 atoast2toast
atoast2toast's picture

awesome headline and story, thanks

Thu, 06/16/2011 - 15:08 | 1375449 lizzy36
lizzy36's picture

Because one always likes a giggle....from client facing Goldman May 27, 2011:

Options strategists at Goldman Sachs advise clients to take advantage of a steady S&P 500 the next two months with put options on the VIX. Goldman recommends buying VIX July 17 puts. The CBOE Volatility index measures the prices investors are willing to pay for option hedges on the S&P 500 and tends to rise when stocks fall, and vice versa. VIX options pricing is based on the expected value of the VIX at expiration, not the current spot. VIX down 3.4% at 15.54. 

Thu, 06/16/2011 - 15:12 | 1375470 Cognitive Dissonance
Cognitive Dissonance's picture

Goldman's really digging deep for those last few greater fools. What will they do when the vein runs out and the mine must be closed?

Thu, 06/16/2011 - 15:12 | 1375486 TruthInSunshine
TruthInSunshine's picture

That's known as the Goldman Bull Call Bear Put VIX Spread.

It's in their manual.

It's either before or after Abacus...

Thu, 06/16/2011 - 16:08 | 1375677 HowardBeale
HowardBeale's picture

Seems low probability that one of Goldman's victims will not eventually walk into one of their offices and mete out a little justice. Intrade prediction: Lloyd Blankfein to be beheaded by man with chainsaw: 99%

Thu, 06/16/2011 - 17:00 | 1375825 richard in norway
richard in norway's picture

ill take the other side of that


unfortunately it rare that these guys get what they deserve

Thu, 06/16/2011 - 19:11 | 1376131 IMA5U
IMA5U's picture

that should be framed.  brilliant!

Thu, 06/16/2011 - 15:07 | 1375461 HITMAN56
HITMAN56's picture

indu in the green b/c momos short covering?

Thu, 06/16/2011 - 15:11 | 1375464 Tyler Durden
Tyler Durden's picture

Central bank buying EURUSD for the second time today. Probably PBoC.

Thu, 06/16/2011 - 15:19 | 1375515 Voodoo-economist
Voodoo-economist's picture

just interested, how do you detect this?

Thu, 06/16/2011 - 15:29 | 1375538 Tyler Durden
Tyler Durden's picture

Inst trading desks

Thu, 06/16/2011 - 15:38 | 1375592 Cognitive Dissonance
Cognitive Dissonance's picture

Tyler is our man inside. For kicks he sneaks onto the Goldman trading floor during NYSE hours and shoots spit balls at the traders while sexting with Marla using the other hand. I have no idea what he does with the third hand and I'm not sure I want to know.

Tyler.......our man in Goldman.

Thu, 06/16/2011 - 15:42 | 1375605 tmosley
tmosley's picture

For those who don't know, NEVER get the clam chowder at haute NY restaurants.


Thu, 06/16/2011 - 15:55 | 1375638 buzzsaw99
buzzsaw99's picture

or the lobster bisque, or the...

Thu, 06/16/2011 - 21:46 | 1376403 Ned Zeppelin
Ned Zeppelin's picture

You gotta love Tyler and ZH! 

Thu, 06/16/2011 - 15:48 | 1375612 dracos_ghost
dracos_ghost's picture

Lehman's ghost rearing it's ugly head again?

Thu, 06/16/2011 - 15:54 | 1375644 Voodoo-economist
Voodoo-economist's picture


Thu, 06/16/2011 - 15:54 | 1375645 dracos_ghost
dracos_ghost's picture

Just curious, was there a tone at 3:00 to announce this shit.

Thu, 06/16/2011 - 15:17 | 1375505 rubearish10
rubearish10's picture

Short covering as in pre-announcement?

Thu, 06/16/2011 - 15:42 | 1375599 etrader
etrader's picture

This is just the same as pattern(ES) as Last hour on  May the 31st. It will have the same outcome. ;)

Someone(s) is getting scroomed on pin risk.

Thu, 06/16/2011 - 15:27 | 1375543 Innocent Bystander
Innocent Bystander's picture

last ditch effort by...

strength of Indu will help pull spx.. easier to work with indu than spx.. IB

Thu, 06/16/2011 - 15:09 | 1375471 Cdad
Cdad's picture

And let us not forget the most important economic indicator of all...Netflix.  Apparently, its NOT what's for dinner anymore.

I'm so grateful for Carter Worth and the way he brought up the "smoothing mechanism."  Because not only is that a really cool name, it makes it much easier to spot "stawks" that are so absurdly priced and over owned, thus assisting in identifying and selling things that are PRICED FOR STUPID.


Thu, 06/16/2011 - 15:11 | 1375484 Cognitive Dissonance
Cognitive Dissonance's picture

Mom always told me not to smooth my mechanism or I would go blind. Luckily I stopped before even strong glasses could no longer help.

Thu, 06/16/2011 - 15:21 | 1375514 Cdad
Cdad's picture

Brother Cog,

Were I you, and knowing how your essays on sheeple psychology about very much about to be needed, either get yourself a nice cury secretary to take dicktation, or invest in a braille keyboard.

Tragic, really, the GROSS misallocation of capital this last year.  Oh well....

**Oh...and thanks to the lunacy of the XRT, an abomination of market manipulation, EVERYONE is going to get yet another chance to sell $30 t-shirts to marauding Greeks**

Thu, 06/16/2011 - 15:28 | 1375526 Cognitive Dissonance
Cognitive Dissonance's picture

I have yet to hear of a crack addict refusing more crack, particularly when it is 'purchased' on credit. S/he certainly doesn't see it as a gross misallocation, but rather the right stuff at the right time.

Just in time crack fracking.......err......fracking crack.

Thu, 06/16/2011 - 15:32 | 1375546 TruthInSunshine
TruthInSunshine's picture

I have been trying to extrapolate some basic lessons on sheep psychology by watching 'The Men Who Stare At Goats,' and this is an admittedly amateurish endeavor, and I do not feel it has served me well.

I need some truly useful psychological education - you know, like what do sheep see when they view Rorschach inkblots?

Thu, 06/16/2011 - 15:38 | 1375583 Deepskyy
Deepskyy's picture

I've not been counted among the sheep in quite some time, but I keep seeing mushroom clouds in mine.


Thu, 06/16/2011 - 17:55 | 1375956 TruthInSunshine
TruthInSunshine's picture

Abby Joseph Cohen says that's actually a delicious shitake mushroom.

Fri, 06/17/2011 - 03:01 | 1376835 Ahwooga
Ahwooga's picture

Do Algos dream of electric sheeple?

Thu, 06/16/2011 - 16:10 | 1375675 juangrande
juangrande's picture

Father walks in on son masturbating and yells "Son! If you don't stop that you'll go blind!" Son replies (waving his arms frantically), " But dad I'm over here!"

Thu, 06/16/2011 - 15:12 | 1375473 dracos_ghost
dracos_ghost's picture

This QE2/Dollar carry trade unwind is going to be fugly.

Thu, 06/16/2011 - 15:14 | 1375481 Alea Iacta Est
Alea Iacta Est's picture

Damnit....its plunging up....

Thu, 06/16/2011 - 15:13 | 1375491 Cognitive Dissonance
Cognitive Dissonance's picture

There is always more helium available when dealing with the PPT. The question is always if it will be enough.

Thu, 06/16/2011 - 15:23 | 1375509 buzzsaw99
buzzsaw99's picture

at 3:20 the bears cover. give it another twenty minutes.

Thu, 06/16/2011 - 15:22 | 1375522 mynhair
mynhair's picture

Think the EUR intervention has a longer half life than remains in this pig.

Thu, 06/16/2011 - 15:29 | 1375535 buzzsaw99
Thu, 06/16/2011 - 15:35 | 1375570 mynhair
mynhair's picture

On the bright side, I get more settled funds tomorrow - more TZA to buy.

Thu, 06/16/2011 - 15:52 | 1375627 buzzsaw99
buzzsaw99's picture

TZA reminds me of a quote from A Fistful of Dollars:


You will get rich here. Or you'll be killed...


Juan De Dios

Thu, 06/16/2011 - 15:23 | 1375508 TruthInSunshine
TruthInSunshine's picture

Bernank on phone with Trichet:

Bernank:   Hey, I am not going into Friday in the red. Paint me some green by raping the dollar a little, capiche?

Trichet:   Ben, that's a little tired, don't you think? Don't you want to maintain some effective tools for when you really are going to need them?

Bernank: Listen, you French Bastard, in case you forgot, you have a little Greek crisis brewing, that will soon be contaminating PIIGSEURO land, so just dump some dollars, capiche?

Trichet:  Whatever you say, Ben. À bientôt.

Thu, 06/16/2011 - 15:22 | 1375524 monopoly
monopoly's picture

Pandora, from 26 to 14 in 24 hours. They should refund all the money they stole, what scum.

LNKD from 125 to 69 in a month.

They will never learn. This market makes rapists look clean.

Thu, 06/16/2011 - 15:34 | 1375578 DonutBoy
DonutBoy's picture

Come on.  No one got strong-armed into buying it.  There are plenty of stupid, greedy people who think they made a killing when they get an allocation.  If they were selling it to 80-year-old retiree's I'd agree with you, but people are begging to be let in on the stuff.

Thu, 06/16/2011 - 16:49 | 1375776 SheepDog-One
SheepDog-One's picture

I dont feel sorry for the momo gamblers at all.

Thu, 06/16/2011 - 21:44 | 1376400 Ned Zeppelin
Ned Zeppelin's picture

Agree  - if you were dumb enough to buy in you deserve what you got. Remember this when they trot out Groupon, another transitory company that will be gone before you know it. 

Thu, 06/16/2011 - 15:26 | 1375525 The Axe
The Axe's picture

This market is like my bi-polar always getting

Thu, 06/16/2011 - 15:28 | 1375527 Coxxy
Coxxy's picture

KCJ-E is at 62.34.  There was a bit of a flash smash around 1252 ES bottom. SKEW is also only updated at the end of the day.  Hard to show an intraday.  The implied correlation indices are untested junk anyway.  You can't take SWAP formulas and apply them to any index, which is what CBOE attempts to do. 

Thu, 06/16/2011 - 15:23 | 1375528 10kby2k
10kby2k's picture

This is getting so redundant.

Thu, 06/16/2011 - 15:35 | 1375579 firstdivision
firstdivision's picture

Tyler, flash crashes will not happen.  A flash crash could only happen in a free-market.  Take the EUR shuffle that is going on.  Also, God help those HFT firms that type in /stop.  They will be arrested before they could leave the building.

Thu, 06/16/2011 - 15:43 | 1375597 rubearish10
rubearish10's picture

How disappointing.......EUR up, ES up. What's Art saying? Everyone knows how critical current support for ES is, naturally.

Thu, 06/16/2011 - 15:45 | 1375602 omi
omi's picture

seems like a decent bounce to get long ES

Thu, 06/16/2011 - 15:45 | 1375603 The Fonz
The Fonz's picture

There it is Rut 780.  I am starting to think they wouldn't bother doing this unless they were going to jack this market up higher by some means after the FOMC meeting.  On the other hand they might understand this is the last line that must hold, and are desperate. That Bill Gross idea that they'll cap interest on bonds would mean a big run up?  Are they just desperate or waiting for the next shoe to drop?

Thu, 06/16/2011 - 15:43 | 1375610 omi
omi's picture

back to 62ish

Thu, 06/16/2011 - 15:49 | 1375613 Coxxy
Coxxy's picture

60.35 it is now down on the day :)  The metric means nothing anyway, it is a poorly coded swap formula from 5 years ago that CBOE decided they could use options to replicate. 

It is completely unproven and provides no value as metric.  It is a guess as an independant variable when you have the dependant variable, only there are 10 unseen independnants as well. 

Thu, 06/16/2011 - 15:48 | 1375614 wombats
wombats's picture

The Dow was up today.  Isn't that good?  I'm confused.

Thu, 06/16/2011 - 15:52 | 1375629 rubearish10
rubearish10's picture

Yeah, it's a "key reversal". <sarcasm off>

Thu, 06/16/2011 - 15:52 | 1375632 Village Smithy
Village Smithy's picture

You aint from around here, is ya?

Thu, 06/16/2011 - 16:41 | 1375753 wombats
wombats's picture

I'm a little new to topics of finance, economics....very ignorant, but trying to learn.

Thu, 06/16/2011 - 21:40 | 1376389 Ned Zeppelin
Ned Zeppelin's picture

Dollar down, stocks up. Dollar down to help descent of Euro. All CBs and there is not much else since the equities fundamentals are all shit today. 

Thu, 06/16/2011 - 15:49 | 1375617 sbenard
sbenard's picture

These aren't markets any more. They're machinations!

Thu, 06/16/2011 - 15:47 | 1375622 mynhair
mynhair's picture

Bears are an endangered species.

Thu, 06/16/2011 - 16:00 | 1375653 foxman
foxman's picture

Hurry and get long before the close, too much negativity and "everyone" expects the market to go down or crash.  LONG USD, SPX, FAS and QQQ

Thu, 06/16/2011 - 16:16 | 1375687 css1971
css1971's picture

I dare you.

Thu, 06/16/2011 - 16:51 | 1375784 SheepDog-One
SheepDog-One's picture

Im long on you dont do it.

Thu, 06/16/2011 - 21:42 | 1376395 Ned Zeppelin
Ned Zeppelin's picture

No, Greece is going down (best bet) and that will trigger all kinds of fun. This is bigger than Bennie's usual controllable problems. They'll pull out the stops, but if you go long, stay nimble.  

Thu, 06/16/2011 - 16:07 | 1375667 Threeggg
Threeggg's picture

Nitrous bottle empty ?

WTF was that !

That was one hell of a VIX swing !

 The formula uses a kernel-smoothed estimator that takes as inputs the current market prices for all out-of-the-money calls and puts for the front month and second month expirations.

Have any thing to do with the Witching tomorrow ?

Thu, 06/16/2011 - 19:19 | 1376143 chump666
chump666's picture

crosses pointing down (FX) there is an omen.  market will force the greek endgame.  Teh ECB is disgrace

Thu, 06/16/2011 - 21:41 | 1376385 Ned Zeppelin
Ned Zeppelin's picture

Dollar down, rock those equities.

I'd really like to see the MSM new outlets when they announce that the DOW surged to also and immediately thereafter add," but of course the USD is in the toilet, which explains what we just told you." 

Agree Greece is unsolveable - Bear Stearns (not Lehman) redux.  

Thu, 06/16/2011 - 22:54 | 1376554 TruthInSunshine
TruthInSunshine's picture

If the Greek fall will so disrupt markets, just imagine what will happen when the rest of the can't-possibly-be-bailed-out (for similar reasons) fall.

Lehman redux?

Much, much larger than Lehman on any stage, including a global one.

The PIIGS will literally set the markets on fire.

Fri, 06/17/2011 - 00:55 | 1376726 pebblewriter
pebblewriter's picture

VIX, with its blow off top, completed a bearish Butterfly pattern at 24.23 that should take it back to 19.12 or less. Very bullish for stocks.


Do NOT follow this link or you will be banned from the site!