This page has been archived and commenting is disabled.
Is Volatility Coming Back?
Via Peter Tchir of TF Market Advisors,
VIX continues to remain low, but intraday (or intranight) volatility appears to be making a comeback. That is volatility in the true sense of moves up and down (I'm not sure when volatility came to mean 'stocks went down').
Chinese PMI is supposedly one of the reasons that futures are up, yet, that seems to be a bad explanation, since futures went from an Amazon induced low of 1306, up to 1311 on the PMI news, but then drifted lower and were at 1304 by the time Europe got up and running. It has been a relentless march higher since then as it went to 1320. It's not quite like last year where multiple 10 point moves were the norm, but we have had a few 0.5% moves up and down overnight already. Yesterday we hit a high of 1315 while Europe was in charge, hit 1302 once the US data was revealed, and clawed back to 1310 for a variety of reasons (month end, amazon and psi expectations chief among them). Again, nothing like last year?s intraday vol, but starting to provide some significant moves that will make risk management a challenge again.
Main isn't really volatile, it just goes tighter every day. There was a brief attempt to open it wider this morning, as some courageous (or poorly informed) traders made it 143 bid. It has been hit like a piñata since then and got as tight 139 offered. It is giving back a touch as the US opens (the opposite trend of last year). It has almost gotten to the point I'm scared to answer the phone since it will be my mother asking if I'm long Main yet? For the record, by the time she knows what the obvious trade is, it's over.
The correlation of stocks and Euro hasn't been as strong as it was last year, though it seems to be returning. In any case, the intraday vol there is also picking up.
This isn't as wild as last year, but a grind to 1.32 followed by a drop to 1.30 followed by a spike back to 1.32 isn't exactly quiet and tame.
These moves are occurring on fairly light volume. So as hedge funds and other asset managers get themselves positioned, volatility is increasing. Volumes remain low. Street liquidity remains very low. I don't see any reason for this trend to reverse itself, and think higher levels of intraday volatility are on the way. Is it time to buy some options to capture this?
Long or short, it looks like trading some options could make sense as some timely 'delta' rebalancing could be very effective and the implied volatility you are paying seems reasonable. Longer dated vol has not dropped as much as short dated vol, so another reason to look at this trade.
»
- 4866 reads
- Printer-friendly version
- Send to friend
- advertisements -
Thank you....I never understand why VIX only goes up with plunging equity markets and not when they ramp up. It's not truly a measure of volatility in the normal meaning of the term clearly.
It's The Fear Index ...
But have no fear, Qeasy3 will keep it low ...
This will fill in the blanks for you.
http://macrostory.com/2012/01/31/understanding-the-vix/
Epic fail
The area under the calls and puts? Ugh
I guess it's soo simple it's hard
The VIX is controlled just like the prices of gold and silver have been manipulated by you guessed it tptb. In other news the baltic dry index is back to 2008 lows. Huh.
Hi i'm new. I have been reading Zh for a while now, have not acted properly on it , but i am tyring, i have been trading as a mule/sheep/jackass for six month now !! Hanging out on yahoo boards.. what an imbecile . I'm not that stupid , i just have been for a while.
I have stocks i'm stuck with... nok, exel,ftr... all big losses.
I have shorts i'm stuck with twm,dto,euo(i have had that one for a year, so ok), and just recently VXX(31) WHAT a F scam.
Should i sell puts on that? Wait for a big bang and get TVIX ? These should as most etfs be short term plays,, again mistakes mistakes..
I do have cash about 50% but in dollars and i know what you all think about dollars, i was HOPING for the big pullback to get out of it and into gold ,silver ect...
I know this is the beans, gold and guns type of place with a bunch of smart minds . But i failed on that also. The only gold i have is in miners GDX not doing so well. The guns are in my closet and i don't really have that much beans.
I can't beleive the news these last two days(well all the time really), the situation in europe(greece will NOT cut salaries, they would riot a la Argentine) with cdss in US banks , THAT IS BIG yet they say NADA,, and they talk about facebook, yep that will save the world economy.
I need some direction and sense in my very confused mind.
Thanks guys!
levered etf's aren't meant to be held longer than a few days. you need to look into the structure of etf's and etn's before buying them. the vxx only goes up when the vix futures are in backwardation. why would you sell puts are you looking to buy more?
Facebook!... Facebook!... Facebook!
I'm sorry did you say something?
The illuminati controlled mass media is a heavy influence on the masses and is doing an excellent job at conditioning the herd with other bulshit news - but even that other news has a purpose too.
Its all programming drop by drop.
What did the hurricane say to the coconut tree?
Hold on to your nuts, this will not be a regular blow job.
write ups like these inspire the bears to walk into another mauling.
In a word, yes. Volitility both up and down. "Bear" and "Bull" are outdated useless terms (sort of like republican and democrat) that, if subscribed to, will end up costing you money. No one is in agreement in any sector of the economy right now (wit maybe the exception of energy producers), so yes, volitility means opportunity.
Heh, funny I opened a EURUSD long straddle position this (european) morning. Now swing!
the ES are only decoupled with EUR when their markets are down, and recoupled only when they're up
What exactly is "Main"?
IG credit index which is very liquid (in normal times can get clips of 100mm off) and tradeable.
Shorting the Banchero Crap this morning,(but only on paper, am long out of this casino, is more fun going to Vegas then this...!)! Stacking PMs and "other goods", ONLY!
How is your EUR/USD short doing initiated at 1.3095? :-)
FAIL. baby goes up much higher from here...
I turned on a CNBC show this morning. Very diverse, the have a chubby little Asian chick named Lee, a clearly light in the loafers mexican boy named Quintanillo and some deranged bald headed down's syndrome victim named Cramer all touting strong economic news. I will follow these people closely. I did research and a lot of the CNBC people have journalist degrees which should make for some awesome financial advice.
I mean this in the NICEST way possible...
If you're tuning in to CNBS for "financial advice"... Then your username suits you...
Peter,
"I'm not sure when volatility came to mean 'stocks went down'"
Thank you, thank you, thank you! It really annoys me when people refer to a move down as increased volatility. Volatility is a measure of standard DEVIATION over n periods, annualised. A strong trend up OR down can result in DECREASED volatility.
DavidC
Because in our binomial world the rate of rally is slower than the rate of selloff
That is volatility in the true sense of moves up and down (I'm not sure when volatility came to mean 'stocks went down').
I couldn't agree with this statement more.
Volatility came to mean "stocks went down" because stock indices are more likely to jump downward than jump upward. Thus, implied volatility is higher for strike prices below the current trading price for the index.
The VIX, however, was trading at elevated levels during the stock surges of the late 1990's - reminding us that while downward jumps are more likely in general, upward jumps also happen and volatility is not necessarily fear.
I would like to know when "uncertainty" (that which the VIX actually measures) became synonymous with "fear". In essence, the same question Tyler asks, but in a different way.
I believe most people call it the fear index because it measures the implied volatility of S&P options so when the VIX is high people are paying a premium for put's, one could try to conclude that since people are willing to pay more for the put options that they are afraid of a fall in the underlying(Or you know hedging the portfolio). Same thing in the opposite direction when the VIX is low implied vol in S&P options are low so theoretically put options should be cheap and the cost to hedge is low. In this case people are not scared becuase seller's of insurance (puts) are willing to accept lower premiums.
Again, what does "Main" mean?
it is the principal thing! why do you ask? yacht charter in italy
s