Two second-day Fed meetings straddling VIX expiraitons on back-to-back months. Coincidence?
December contract should settle well again the morning of 12/18 (north of 14 for sure.) By the afternoon, maybe another crash like Nov settlement.
First 25% gone at a 25% profit. SHLD side kind of a bust right now, but really helped when I was early into JCP.
Strong in the morning due to settlement. Although the VIX was below 14 for most of the last week, settlement was north of 14. Just shows you the games played with this index. Should have sold the VIX 14 puts for over a buck last week I guess. I think you'll likely get a similar setup as we move towards no-vol December. The period from December expiration until January could be fun again this year, however.
Would not be surprised if you saw $90 but only for a day and then a return towards $100. Last few trips (and it has been a while) sub-90 haven't been long-lived. Oil seems to be a tough trade right now because what has worked in the past isn't working anymore. Something to stop the DXY rally will help oil - just not sure what that catalyst might be.
It often takes some vendors a day to get the new options loaded - could find some folks stuck with weeklys they can't trade tomorrow. Old series can often become illiquid.
Rules on splits haven't considered that the options markets have new products out there now. Better off with a Friday split so that traders have time to adjust. The open interest on the 11/8 series for 12 and 12.50 options is almost 90k.
This is absolutely nothing new and is not caused by the lack of regulation but by some insane process that sets values based on a limited time frame.
Whenever transactions are based on prices at a definitive point in time (or a short time frame) you'll see this behaviour by market makers. The FX notes above caused by old-school processes are not that different than what we observe in the monthly VIX settlement, monthly options in/out of money (or pins), and daily futures settlements where transactions in a 15 to 60 second interval determine pricing.
I'm quite suprised the gov't hasn't figured out that to pay people less in social security we just need lower prices in July through September every year. Magically rents, gas, and other major inputs to CPI would be lower in these months yet mysteriously rebound in October.
The problem with selling calls (and I really wish slcehamrick was around) is that the vol of vol can get really nasty on a spike - so sometimes a $1 increase can lead to a $1 increase in an OTM option which normally doesn't occur under normal conditions.
The spread will help since the further OTM call will also spike, but I'm not sure the profit is there unless you go ITM/ATM but out some months (like selling the 7/10 March 2014 spread.)
That said - last week was the time to sell - the downside is protected by the math and the calendar for a bit here and further losses won't be as fun as this week.
See CBK. Wasn't exactly in the same place balance sheet wise (yet had the comparable cash burn) but had some similar issues with product mix, sales initiatives, and misaligned management. BBY was left for dead last year, too.
Mine is also part of short SHLD (which is down over 10% from the 62.12 I started at.) I'm about 7-8% down on the JCP from 7.95. Net I'm up, but barely.
I took some lumps yesterday - fortunate for the SHLD short which has thusfar offset the losses in JCP. The trade is still profitable even with the ~10% loss in JCP.
Look back at the 90s - there were actually two phases. The first phase in the mid-90s with lower vol and the second phase in the late-90s with the higher vol you mention.
One difference between the late 90s and today - while the y/o/y change in the S&P is 15%+ in both periods - in the late 90s there were a lot more +/- 4-5% months in the trend than today - important since the options within the VIX calc are the next one-two months. This latest rise since late 2011 has been more slow and steady which supports the lower VIX (and the period is more similar to the mid-90s).
If that is the case, one could argue that the market still has a lot more room to get crazy (in the indicies, since there is definitely a lot of crazy in some specific names like NFLX, TSLA, etc.)
Oddly SHLD has gone the opposite direction over the last month. Kind of like a long JCP-short SHLD trade here. I have a little current experience in these retail things with CBK - looked like manangement couldn't get out of the way, stock left for dead around $1 - now up to around #$%$ all about execution.
I received a notice from Redbox about offering a streaming service. It's only a matter of time before the other content holders provide similar services and pop the NFLX growth balloon.
VIX (probably would only see 14.5 or slightly less VXX if the Oct futures rebounded from 14 to near 16 depending on when/how quick the recovery was.) Still need a catalyst, too, since there isn't much left (yeah, the debt ceiling, but that could go away overnight again.)
I'm going with ugly day on this reasoning - the VIX is about 125-175 bps higher than it should be given the S&P levels near highs and the trading over the past week (probably closer to 13.0 than 14.5).
That premium is almost entirely now due to today's release since Syria is long forgotten. Like any vol play, once the event happens vol comes in immediately even if the outcome is bad.
The index is entirely based on the Oct futures at 15.45 this morning. Quite possible if the VIX dives below 13 that those futures get to near 14. That would put VXX struggling around 13. It's that point I would consider a buy for one of those 10-15% up spikes back to the 15 area on the index.