VIX Graph February 19, 2010

Another week, another rally.  FED boosts interest rates! No one cares.

After threatening to break out to the upside, VIX returns below last week's low price and once again threatens to dip below 20.

RVX is approaching its recent lows.

The markets are grinding higher and there's no excitement in VIX land.


Vix_feb19 

Rvx_feb19

4 Responses to VIX Graph February 19, 2010

  1. jeff partlow 02/20/2010 at 6:55 AM #

    Hi Mark,
    With VIX slightly above 20, I noticed that the Implied Volatility for the SPY closest-strike and front month call options are now close to 16. Aren’t these two numbers normally very close to each other? What are the implications for such a large disparity right now?
    Thanks and Regards,
    Jeff

  2. Mark Wolfinger 02/20/2010 at 9:02 AM #

    Jeff,
    Before drawing any conclusions, I’d want to verify that the same is true for SPX options. If it’s not, I assume it’s a very temporary aberration that will disappear quickly. There’s money to be made by buying SPY ATM, front-month straddles and selling SPX front-month straddles – when there is a significant volatility difference.
    If SPX options are just as ‘cheap’ as SPY- then I’d look at NDX and RUT options. If those near-term options are not trading with a decreased IV, then there’s a potential profit to be made by buying SPX and selling the others. You must be certain the plays are market neutral – and that’s not delta neutral. That’s $delta.
    Jeff, I don’t know what to make of this situation, especially if you find it to be true for other major market index options. I suppose it means that there is simply a dearth of option buyers and that ‘everyone’ expects a quiet market over the next few weeks.

  3. John 02/20/2010 at 11:41 AM #

    Hi Mark,
    I have a quick question. Let say I have sold a put. If the put owner has sold to close, does it mean my position will never get assigned? How do I know whether the put owner has or has not sold to close?
    Thanks,
    John

  4. Mark Wolfinger 02/20/2010 at 4:04 PM #

    John,
    Good questions and worthy of it’s own blog post.
    The quick answers are:
    No. You can still be assigned.
    You don’t know and there is no reason to know