As Mr. Market remains skittish (at least he can remember as far back as Monday), and PM’s basically rushed to the door in the last hour of trading today, volatility rose 10% in the last two hours of the day. The calendar has an amazing effect on money managers. What goes on paper on 2/28, or 12/31, or whatever is music to exchange commission toll-takers. Get out and print that 1% return for the month before it disappears.
If you don’t believe that these guys fear the calendar, get a load of this article. This option trading fund got sick of trying to hedge positions just for the month-end print. So they changed their statement date to match the monthly options expiration date. Geez, how brilliant! Instead of throwing client money away trying to make themselves look good, they merely changed the accounting. This should not be a novel idea:
And then tomorrow is a new month, which of course, usually means putting it back in. Here’s a shocking statistic:
From the Cialis 10mg Traders Almanac:
“Over the last 15 years, the Dow Jones Industrial Average has gained more points on the first trading days of all months than all other days combined.”
First days since 1997: 5551 Dow points, +31.36 pts/day
All other days: -804 Dow points, -.23 pts/day
VIX front and near month futures held their ground all day and the VIX was all over the place. These two will get highly correlated as we head toward expiration, and that generally means that volatility will fall. March historically sees a fall in volatility toward the end of the opex cycle, it is sharp and distinct. We will be looking to grab cheap VXX puts on spikes in volatility.
|VX G3-CF||CBOE VIX FUTURES||February2013||16:44:34||13.07|
|VX H3-CF||S&P 500 VOLATILITY||March2013||16:15:00||16.10||0.70||15.30||16.20||15.08|
|VX J3-CF||S&P 500 VOLATILITY||April2013||16:15:00||16.70||0.60||16.05||16.70||15.70|
|VX K3-CF||S&P 500 VOLATILITY||May2013||16:15:00||17.05||0.30||16.65||17.20||16.40|