Catching The Invisible Hand Pushing On The VIX In Action

Tyler Durden's picture

Every now and again the coincidences (or some might call them conspiracies) become too much to bear. We have noted the incessant deep-pocketed use of volatility as a levered way to manage equities up (or down we suppose should the need arise from a centrally-planned banking institution that does not feel the incumbent is in his court). Today was a great example of the desperate interaction of the world's most over-owned (and biggest) company and selling pressure over-whelming the VWAP algos. As the chart below shows, the early selling pressure in AAPL smashed prices down to yesterday's close and closing VWAP; volumes surged as algos piled institutions out but they soon got overhwhelmed as the price fell through their VWAP level (which means the costs start to pile up to the market-maker's algo which promised VWAP execution). Immediately Plan B comes into play - Sell Vol Hard! which implicitly lifts the stock in a 'bullish' index-signaling way and enables the algos to offload the overwhelmed volume to unsuspecting nibblers. Once stable and flat again - business can continue and the selling commenced as they bought back the vol they sold. Conspiracy or coincidence? If you know how VWAP algos work - there is no doubt.