Most are still in disbelief that the VIX has hardly budged in the face of this market cycle. Being inversely correlated to the S&P, it is still a correct reflection of the lack of fear in most of the market. The $VXN has been the most accurate reflection of market volatility and fear this year and it is now at an important inflection point, as is the market.
The VXN suggests this is no more worrisome than most of the corrections we went through last year. However, it has been a huge roadblock for option traders this year. Premiums have been super inflated, and even if you catch a good price swing, you aren’t going to be making what you were off your risk. With this being the biggest risk to option buyers, I’ve done less up til now, because there is much more risk than reward in buying options.
A leg lower in stocks will trigger volatility spikes, and one that might cause a break in the range in the VXN. While an ATR applied to the Nasdaq or Russell suggests these trading conditions are equally as brutal as they were in 2010 or 2011, the VXN hasn’t reflected the same level of fear yet.
I would have bet coming into the week that these divergences all resolve, especially considering the carnage in growth stocks. There hasn’t been a correlation coefficient this low (.30) between the SPY/IWM for this long since 2000.
Since I can get cheap options in low beta, I am playing the long side in value stocks, and trying to play puts in select technical set-ups. A few more bearish bets I am looking to make are in FSL, CTSH, WDC and ETFC.
OA
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nice blueprint of chart setups for those wondering what you are looking for with a bearish setup
i can’t remember the last time i’ve gone this long with this few trades. I’m about to switch the safety off though and get back in.
I feel we are close to the bottom in tech. What do I know though.
short NQ 3535.5 and ES 1871.25
none of the vix vxn vxx guages are fear based. they are statistics driven by correlation and realized vol. spx realized 5 day vol hit 4 yesterday. if you pay 14 for 1 month vol you will find it very hard to make money. there is zero reason to buy vol here. it doesn’t measure complacency, or fear. it measures the best anticipation of realized vol going forward. the biggest suckers bet in the options mkt is is fading a low vol environment. the cycle of low vol: overwriters and specs sell vol, mkt makers buy it, try to hedge it, can’t, so they scalp gamma, further compressing realized vol. which further compresses implied vol and the cycle continues. wait and be late is a better strategy to buying volatility. there are currently zero catalysts for vol to increase. just because your favorite momo is down 75% and you bought the whole way down doesn’t mean spx or ndx vol is cheap or at an inflection point
Sorry, who said “buy vol?”
Wow…you should hear him explain to his girlfriend how she really can’t do better…she will just have to scalp gamma
7 comments. WOW. Things are really bad out there. Could it really be (RUT to zero)? Now that I’m loaded with TNA puts I’m sure the small caps will rip.
Yeah I bet Web traffic is at a crawl as well.
holding the market shorts and long YEN and TVIX. A real selloff will be if all the indices keep pace. Buyers have showed up at the open the last 3 days aggressively and this will be another tell if they are absent. Big day with it being a Friday IMO.
i don’t think buyers have been out last three days to let eventually fall everything on friday . if it is the case , it’s not because of buyers missing a chance , it’s because of buyers missing .
i mean they’ve been missing for a while if we go down a cliff , and what we’ve seen last three days is just another piece of the cliff formation
Hope the dr’s appt goes well
Deep tissue massage. I’m a little worried.
Rolfing session? Those can be paaaaainful
Yep. I am bringing a stick to bite down on.
Oh good lord son good luck; those things hurt like hell
Bot LNKD May 30’s $130 ($1.40) strike on this “BlooP” strength today. Should hit resitance on Bear Flag soon. PE ration of 722 just doesn’t fly in this market
sold 1/4 NQ +20
Bot IBM calls for cheap on this double bottom on the daily. Value style PT is 194-Stretch Target is $196
Long Live Lanforce
I know he hasn’t been around, but lanforce didn’t die, did he?
I’ll reach out to him.
I miss that guy; he was my virtual buddy…lol
+1
many here would wish him well.
Indeed
+1, miss the Lanforce era and stretch targets, we miss you buddy
out 1/2 ES +6 gonna try and hold the rest.
Sold CORT, CNDO and DNDN down big. can’t take it anymore i’m sure the bounce here.
out another 1/4 NQ +8. I feel there’s a big move coming this afternoon but it’s a coin flip which way.
Market continues to be brutal, even after all the carnages. My biotech basket in my ROTH account is sucking wind. Even the last man standing, ECTE, is down 25% today alone, joining GENE, DSCO, and ROSG in 30% plus paper loss category.
out flat the rest of NQ and and the ES +2.
this could be an epic FU to the bears.
Epic.
yeah it feels like a big one. I’m looking long. To many people leaning one way (including me)
did you take a poll recently? Would love to know what the results after yesterday.
Taking one now, will post this recording in my absence later this afternoon.
RUT very divergent to the bull side today.
call me crazy but YELP is starting to look good for a trade.