Volatility Tracker Sees Cheap Options
Mon, May 11, 2009 | Jared
Volatility Tracker for May 11, 2009
The non-participation of the Nasdaq 100 in last week’s rally is being widely cited as a sign that the rally in equities may be nearly over. [2] From an option trader’s perspective, the fierce decline in volatility is also of note: short term realized vol continues to fall [4], while the implied volatility indexes [2] and their futures term structures [6] have declined as well. Notice that the volatility futures term structures are in contango (i.e., they have an upward sloping curve) – a condition we haven’t seen for some time. It is important to keep perspective about all of these moves – in terms of both realized and implied volatility, we are still retreating from historic highs that may not be revisited for years or even decades. Despite the decline in the spot VIX, our VIX premium ratio is completely neutral, and the realized/implied volatility ratio for SPX confirms that options have been cheap over the past couple of weeks. [5]
Short-term S&P 500 Volatility Bias: Positive
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May 17th, 2009 at 4:50 pm
[...] Last week, I noted the absence of the Nasdaq 100 among rallying indexes as a sign that the bull run was likely over. Price action this week confirmed that view, as the only component to eke out any gains was gold. [2] While SPX options can no longer be considered particularly cheap, [5] I also see no reason to anticipate a dramatic rise in either realized or implied volatility over the coming weeks. Volatility futures flattened out [6], and the VIX premium ratio isn’t providing any signal [7]. [...]
May 22nd, 2009 at 4:30 pm
[...] Here is the original: Volatility Tracker for May 11, 2009 [...]