Condor Options

Volatility Tracker for June 8, 2009

This week may be a turning point. None of the indicators below are quite at extremes, and I am keeping my S&P volatility bias at neutral since I would rather be a little late than very early. However, notice that volatility sellers have been “right” since at least mid-April, [5] a trend which is far more likely to reverse sharply than to flatten out. The S&P 500 looks overbought on a price basis, [4] especially since rallies are historically less likely to tarry in that two sigma channel. The futures complex continues to stay on the skeptical side versus plunging spot IV index levels.[7] And the VIX Premium Ratio [8] is finally perking up -the current reading of 1.07 is the highest since April 17, a day that was followed by a 15% jump in the VIX.

Besides the layout change, I’ve added three charts this week. The price and Bollinger Band charts for SPX [4] and GLD [9] replace the price and IV Index charts; it is helpful to know when an asset has risen or fallen two standard deviations from its 50-day mean. The implied volatility indexes for the S&P 500, gold, oil, and USD/EUR are displayed in [3]. In the coming weeks, I plan to add charts for oil and the dollar/euro similar to those already provided for gold.

Short-term S&P 500 Volatility Bias: Neutral