Will the summer generate a volatility event?

Will the summer generate a volatility event?

 

Well it is one week until we have the Option Pit “Fixing Terrible Trades” webinar.  It is free for all Option Pit subscribers so this is a good opportunity to sign up for a trial.  I can remember a lot of summers sitting in a pit with not much to do and the only noise would be coming from the pit that had earnings names.  If you had no earnings coming out, there was grumpy slow trade.  Right now we have grumpy slow trade and here’s why.

There are two major themes going through markets and they are:

Earnings and economic growth which so far is positive- just look at GOOGL after hours

Trade War uncertainty which is a big but nebulous negative so just pick a Tweet day

So we net these two out and we get a market that is dead flat.  A little news either way and that is good for a .50% rally or selloff but nothing really exciting.  For vol sellers the really tough part is to get a rdrop in VIX.  As of right now 30 day ATM IV 9% and it Is hard to see that going down at least until the slough of earnings is over.  We would need 8% ATM or less for VIX to put in lower numbers but again that seems tough.

That leaves us with a trade type that is a little long vol, a little long theta which is some kind of time spread with a kicker in SPX.  We priced some today in our Chat Room and will no doubt do it again tomorrow.  I don’t think the VIX futures start to fold until later in the week since we need the bulk of the big tech earnings to play out.

Again, if you are looking for something to do on Sunday check us out here

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