Condor Options

Volatility Tracker for May 24, 2009

Equity indexes were relatively unchanged for the week, and investor sentiment seems to be split between those who anticipate a quiet, trendless summer and those looking for lower prices and higher volatility. While the spot VIX number received a great deal of attention, the real action in volatility was in gold and the dollar. [2] Notice that the substantial rise in implied volatility in gold coincided with a price rise over the same period – a phenomenon that is less common in equities but not so remarkable in commodities. [8] Traders who want to play a directional thesis on gold should consider buying options here.

Per the S&P 500 implied/realized ratio, [5] the market has been consistently less volatile than implied by option prices – notice that the ratio has not dipped below even since early March. Volatility futures moved into backwardation [6], and the VIX premium ratio persists within a normal range [7].

Short-term S&P 500 Volatility Bias: Neutral