Implied Volatility is Pricing in a Yawn Tomorrow

So yesterday we suggested that everybody keep an eye on their deltas ahead of Friday’s big employment number. Well, if volatility readings today are to be believed, you could probably be trading blind today and tomorrow and not really notice – the index volatility indexes (VIX, VXN, VXD, RVX) opened higher but then sold off for the rest of the day. Maybe everybody got their “employment number” puts at the open. Either way, implied volatility is low just about everywhere, whether you’re looking at indexes or individual names or sectors, whether you’re measuring vs. historical volatility or vs. moving averages and mean reversion.

What that means is that markets don’t expect too much drama tomorrow.

This is just a super short-term point, however. If the VIX:VXV ratio is to be trusted (thanks again to Bill Luby for his work on this), implied volatility is currently about fairly priced.

Reversal Readings

Overbought conditions persist; further evidence of the importance of using multiple indicators for your timing. If you’re an RSI fan, using 14- and 5-period readings gives you a better sense of the general situation.

DIA, SPY, IWM – above 97
EEM – Emerging Markets – 99.68
XLE – Energy – 99.21
EWA – Australia – 99.68
IYR – Real Estate – 99.12
BND – Bonds – 5.51

Note: Frank posted calendar spread ideas on EEM, XLE, and IYR earlier today, so be sure to check them out!

Tags: , , , , , , , , , ,


0 Comments For This Post

1 Trackbacks For This Post

  1. Friday Morning Data | Condor Options: Iron Condor Trading Newsletter Says:

    [...] Implied Volatility is Pricing in a Yawn Tomorrow [...]

Subscription Access

Get Our Free Newsletter

Weekly emails with Options market updates and analysis.

About

Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

Categories

Open All | Close All