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VIX Closes 10% Off Day’s High

Posted by Scott Murray on June 24, 2013
Posted in: Uncategorized. Tagged: Options, VIX, Volatility, VXX.

The VIX touched nearly 22 before falling intraday to 18.60 as the S&P bounced off 1560, a 30 point drop. The markets then faded into the close and the VIX reclaimed 20. The VXX was much more behaved, as the futures held below spot and then opened up a spread to spot before closing in line. The VXX is actually far less volatile than the VIX:

vxxvix624

This chart demonstrates how the much tighter the VXX range was than the VIX. And the futures are the reason, they did not fluctuate like the VIX did today:

Symbol Contract Month Time Last Change Open High Low
VX N3-CF S&P 500 VOLATILITY July2013 16:21:54 20.15 1.15 19.75 20.35 19.35
VX Q3-CF S&P 500 VOLATILITY August2013 16:22:07 20.30 0.90 19.90 20.48 19.78
VX U3-CF S&P 500 VOLATILITY September2013 16:15:00 20.80 0.90 20.40 20.85 20.25

The S&P would seem to have two major support areas, the 200 day moving average at 1506, and 1550, where it spent several weeks in consolidation:

spx624

Courtesy of stockcharts.com

And no one should be shocked that the oscillators sit near the lowest points off the the last year:

nymo624

As I’ve pointed out several times, June is one of the worst months for stocks (#11 Dow, #10 S&P), yet July is one of the better ones (#4 Dow, #6 S&P). It is very possible that we see a bounce into the end of the quarter, and beginning of the next quarter. With that, volatility could come in a bit. The summer is typically a lower volatility season, and we will go into that tomorrow.

In the meantime, I picked up July VXX puts at $18 for .14 and $19 for .31. When the market bounces, I will let these go. I think a reasonable target for the $19’s is .50, and at that point I can reevaluate how to handle the $18’s. The $18’s were .60 only a few days to go and have four weeks until expiration.

I also started a SPY calendar at 157, selling this week against July 19th for 1.40. If the SPY closes at or below 157 this week, those are great runners for a bounce.

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