June 14, 2010
Good morning. Snap back week for the market last week, as the market looked at some stronger numbers out of Asia and the run on the Euro subsided somewhat, at least for the moment. The SPY’s finished the week up 2.86 (or 2.7%) to close at 109.68, virtually the same level it closed the Friday before Memorial Day. So we had a fairly violent move to the downside, down to 104.65 last Tuesday, before recovering to slightly higher for the two weeks last Friday. This morning the market looks to extend those gains.
March 29, 2010
Good morning. Another quiet week in terms of volatility last week, but again the market did finish with a gain. The SPY was up fractionally again, gaining .61 to close at 116.58. At times, both Thursday and Friday, it looked like there was a chance of a real upside breakout, but late sell-offs dampened the mood. On Thursday, for instance, the SPY traded all the way up to 118.17 before closing near the day’s lows at 116.65. Normally that would be the sign of a tired market, but any attempt at a sell-off seems to be met by buyers below the market (at least so far). The VIX was actually up on the week, although fractionally, closing up .82 to 17.77. If anything, the upward skew in the implied volatility going forward worsened, and it remains significantly more expensive, in terms of implied volatility, to buy far out protective puts than it does to buy anything near term. For example, in AT&T (trading $26.24), the January 25 puts of 2012 are trading for a 23 implied volatility vs. the near term April 26 options at a 15 implied volatility. I am not sure what sort of relative carnage or volatility spike the market is collectively expecting going forward, but it is sure priced in.