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Morning Vol Report 05.16.18

Morning Vol Report


Are we ready for a single digit VIX?  05.14.2018

Are we ready for single digit vol again?


We just put in a drop to the 12 handle in VIX for two days in a row.  One would have to travel back to Jan2018 to taste those numbers.  For whatever reason IV is discounting the news out of Washington DC as opposed to caring about every twist and turn in February.  Will it continue?

I posted a chart from  VIX Central and notice the Jun VIX future is about 1.50 over cash.  That is a little light for me and with VIX this low the premium should be bigger.  Either the vol market is expecting another .50 or more crush in VIX or juice sellers got a little ahead of themselves.  We are setting up a “deep contango” trade where VIX could fall apart, ATM IV to 9%, which would produce lower numbers.  It is something to keep an eye on.  This usually spells more downside for UVXY, VXX.

The steeper the future premium the larger weight on the vol products.  The trick is how much.  If you want to learn about this sign up for tomorrow’s FREE  webinar here.

Disclosure: Positions in VIX, VXX for Karman Line Capital, LLC

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Yet another schizophrenic market where the good earnings took us up and generic interest rate worry took us down. I talked about AAPL earnings holding up vol but the term structure in VIX is telling a bit more of a tale. I think the flatter term structure in VIX May and Jun is signaling a market set on moving. We have not seen the ‘bid the vol into the FOMC” in about a year since the rate picture switched from QE to undo QE.



What we have not had this year is lower realized vol in the SPX, certainly not like 2017. As of now, no market moving fear has turned into a scary reality. Rates are going up, unemployment is low and corporate earnings are steamrolling yet we still trade a 15.93. I think we get more clarity on Wednesday. SPX prices gamma and the VIX prices vega and right now both are looking move. The trade could be a curve flattener for May16 and Jun VIX20. You could read about it in our Vol Newsletter if you subscribe here.


Our VXX made Easy course is coming so see the special here.

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Morning Vol Report 4-30.2018 

Will the VIX wait for AAPL?

It would appear that AMZN, INTC and MSFT kicking the earnings door in is not quite enough to move the QQQ as it is up .01 as I write this at 2pm ET on a quiet Friday. With much of the big earnings reporting, banks, tech and oil, one would think that VIX would have a bit more of a reaction. Today we are getting a .72 drop with only a slight drift lower in all the VIX futures.
For the first time in a week the VIX cash is settling lower, or appears to be, with VIX futures just barely responding. The drop back into a normal type of contango is usually the sign of lower volatility except… those darn AAPL earnings. I think we set up next week for a nice vol crush after the May 01 AAPL release.

Options and Charts by Livevol
There are a few choices to sell vol but now that we are in contango some cheap VIX puts could work ok. I would stick with the May cycle, something like the VIX May16 16 put for 1.10 since in is already .50 or so ITM.
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