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Intraday VIX And Equities Now Completely Dislocated; Money Market Holdings Back To Pre-Lehman Levels

Tyler Durden's picture


The VIX is now green for the day, even as equities are stuck in a continuing 2009 high breakout channel. It appears dispersion traders are aggressively buying index vol as they sell single name vol ahead of option expiration. Furthermore, the persistent bid for treasuries is there. As the money market guarantee is set to expire in the next few days, is this merely a last minute push by advisors telling their clients to get out of MMs and into the "safety" of any and all other asset classes? And speaking of money market accounts: we are now back to the pre-Lehman levels. All the "money on the sidelines" that moved out of equities as a result of the events since the Lehman collapse is now back in.


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Wed, 09/16/2009 - 14:46 | Link to Comment Sardonicus
Sardonicus's picture

Space Junk Alert!

Casinos falling like sky-lab

Grab a helmet

Wed, 09/16/2009 - 14:59 | Link to Comment SV
SV's picture

I am interested to know from people at what point (SPY, VIX, etc) achieves "max pain", whereby the most people get screwed before OpEx?  That would be a nice place for a vertical spread decay trade.

Wed, 09/16/2009 - 15:49 | Link to Comment SV
SV's picture

Much grass.. 

Wed, 09/16/2009 - 15:05 | Link to Comment Anonymous
Wed, 09/16/2009 - 15:22 | Link to Comment Anonymous
Wed, 09/16/2009 - 15:37 | Link to Comment Anonymous
Wed, 09/16/2009 - 16:00 | Link to Comment Anonymous
Wed, 09/16/2009 - 16:18 | Link to Comment Gilgamesh
Gilgamesh's picture

SPY 109.68 looks real good now.  It's sitting just a hair below the gap starting at 107.62, and with today's close at the high - the fill could be accomplished this week still.


A turn back down at that 109.68ish level would bring on the negative technical traders.  I think you'll find the technical talk about the gap starting tonight (if it hasn't already).

Wed, 09/16/2009 - 15:07 | Link to Comment TumblingDice
TumblingDice's picture

So is the play now to go long equities and destroy anyone who is now taking advantage of the options discount?

Wed, 09/16/2009 - 15:15 | Link to Comment Brian Griffin
Brian Griffin's picture

What's the deal with the MMFA chart?  The range is not what is represented in the x-axis.

Wed, 09/16/2009 - 15:21 | Link to Comment Anonymous
Wed, 09/16/2009 - 18:18 | Link to Comment Hephasteus
Hephasteus's picture

Bucks gonna get broken and broken hard.

Wed, 09/16/2009 - 15:25 | Link to Comment BobPaulson
BobPaulson's picture

Just got an email from my broker and I asked him where he thought we should hide on the next leg down. He said he thought the market should be strong considering how much money is on the sidelines waiting for an entry!!! This is the guy who told me I was going to miss lots of profits when I went to cash in summer 07.


I actually don't know what the MMFA index is but I'd like to email him the above chart but I'd like to know more what I'm sending him.

Wed, 09/16/2009 - 15:39 | Link to Comment Daedal
Daedal's picture

You're paying  a broker, with whom you disagree with, to handle your trades -- Why? By the virtue of you posting on here, I assume you can  utilize something akin to TD Ameritrade...


Wed, 09/16/2009 - 16:08 | Link to Comment BobPaulson
BobPaulson's picture

Misnomer: my friend who is a broker who wants to be "my broker", but yeah, good point. 

Wed, 09/16/2009 - 15:49 | Link to Comment butchee
butchee's picture

Tyler, would you post a primer on what you feel everyone should know about the VIX and your take on index volatility vs. single name?  Am I a dumb ass for thinking that volatility does not express whether the direction of the next move would be up or down?  Or does a lower VIX always correlate to a higher S&P?  Thanks.

Wed, 09/16/2009 - 15:53 | Link to Comment max2205
max2205's picture

TD, and what / where, besides the mattress would be a safer bet than MMkt's?  Tbills GSE's...OMG!

Wed, 09/16/2009 - 16:13 | Link to Comment Anonymous
Wed, 09/16/2009 - 16:42 | Link to Comment VanWinkle
VanWinkle's picture


Volatility is typically inversely correlated with the directional market move. So, start looking for a correction when volatility is at relative or cyclical lows. Vol usually contracts when the market is running. The fact that we've got the market making new relative highs and vol is expanding is curious and a bit unsettling.

Wed, 09/16/2009 - 19:15 | Link to Comment butchee
butchee's picture

Volatility does not measure the direction of a trend, only its magnitude. This is because of when calculating standard deviation (or variance), all differences are squared, so that negative and positive differences are combined into one quantity. Two instruments with different volatilities may have the same expected return, but the instrument with higher volatility will have a larger swings in values at the end of a given period of time.


The VIX is quoted in terms of percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, on an annualized basis. For example, if the VIX is at 15, this represents an expected annualized change of 15% over the next 30 days; thus one can infer that the index option markets expect the S&P 500 to move up or down over the next 30-day period. That is, index options are priced with the assumption of a 68% likelihood (one standard deviation) that the magnitude of the S&P 500's 30-day return will be less than 4.33% (up or down).

These are both from Wikipedia and are what that source says about volatility NOT implying direction......What am I missing here?  I still do not understand why the VIX is necessarily inversely correlated to the S&P?  Sorry for my being so dim.


Wed, 09/16/2009 - 17:07 | Link to Comment Anonymous
Wed, 09/16/2009 - 18:58 | Link to Comment Tripps
Tripps's picture




Wed, 09/16/2009 - 20:29 | Link to Comment Anonymous
Thu, 09/17/2009 - 10:29 | Link to Comment Anonymous
Wed, 09/16/2009 - 20:53 | Link to Comment Anonymous
Thu, 09/17/2009 - 02:42 | Link to Comment Grand Supercycle
Grand Supercycle's picture


Daily chart - ongoing bullish divergence (which is bearish for stocks)

Weekly chart - bearish / neutral

Monthly chart - neutral


Thu, 09/17/2009 - 02:45 | Link to Comment Grand Supercycle
Grand Supercycle's picture

VIX INDEX measures investor fear vs. complacency.

And it can be seen as a good contrarian indicator.


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