VolatilityAnalytics.com

  • About the Volatility Analytics Newsletter
  • Contact
  • VIX 101

Implied Volatility is Too Low

Posted by Scott Murray on April 19, 2013
Posted in: Uncategorized.

Why are markets unprepared for the next two months? I have no idea, and after this week, you should be thinking hard about how the next few months are going to transpire. The market is flagging at 6 year highs, on declining revenue and earnings, and there is no buying pressure in the options market.

I’m not predicting a move either way. All I am saying here is that the puts are not being priced correctly; there is not enough demand. This disrespect is forcing me to think that the market is failing the smell test, and it is going lower to force those to respect the downside. DIA and SPY puts are easily obtained ATM for an IV of 13 or less.

If you are fundamental, there are plenty of bearish arguments. If you are technical, there are plenty of bearish arguments. If you have common sense, you can be bearish. Look at a chart of the S&P:

s&p419

What looks good about that? New all-time highs and a u-turn to Buy Viagra test the 50 in short order. Contrary to popular belief, Ben B. does not sit at his computer and stick-save the S&P by purchasing futures contracts between 3 and 4 pm. This kind of talk is pure heresy, not unlike thinking that there was a movie studio that filmed the moon landing.

Look, taxes are over. People are done meeting with theirĀ advisersĀ and telling them to rebalance to equities. The natural economic cycle is shifting to the natural summer slowing. The dollar is rising relative to other global currencies. (major headwind to earnings, analysts have a tough time putting this in their “models”)

May is #8 for the S&P and June is #10.

So, go get long and BTFD. It’s all about being full invested because your time horizon and dollar cost averaging make it all ok.

Outlook/Action:

Still holding June index puts. Buying put calendars on stocks during earnings when high IV makes it cheap. Expect April to hold up, and all bets are off during May and June.

 

Posts navigation

← Everyone Must Be Dying to Short VXX
Volatility Falls as Global Markets Rally →
  • Subscribe to the VA Newsletter – $30/mo

  • Follow us on Twitter

    Follow @VolatilityWiz
  • RSS Volatility Analytics RSS Feed

    • Volatility Analytics Newsletter Samples
  • Recent Posts

    • Volatility Analytics Newsletter Samples
    • Summer Volatility – Will it Vanish?
    • Creative Volatility Trading (Part 1) – Calendar Ratio Spreads
    • Trading Volatility in a Low Vol Market
    • How Much Short-Term Downside is Left in VXX and UVXY?
  • Archives

    • May 2021
    • May 2018
    • May 2017
    • April 2017
    • November 2015
    • August 2014
    • May 2014
    • March 2014
    • November 2013
    • October 2013
    • September 2013
    • August 2013
    • July 2013
    • June 2013
    • May 2013
    • April 2013
    • March 2013
    • February 2013
    • January 2013
    • December 2012
    • November 2012
  • RSS VIX and More Blog

    • The Latest on VXX and Additional Creation Unit Suspensions by Barclays
    • SPX Weekly Options Will Soon Be Available with Expirations Every Day of the Week
    • UVXY Dominates VIX ETPs By Dollar-Weighted Volume
  • Categories

    • Uncategorized
Proudly powered by WordPress Theme: Parament by Automattic.