So if SKF is the new Fear Index, how about volatility on that Fear? And better still, longer term anticipation of the volatility of Fear?
Here's a chart of 90 day normalized options volatility on SKF, basically an October option now. And yes Houston, we have record numbers here.
Again, this pup essentially doubles XLF volatility, so keep the absolute numbers in perpective.
Here's something bizarre though. If you watch pretty much every tick here, as I do now, you would expect shorter term stock volatility is at a record too.
Oddly, no. The lower chart shows 10 Day historical volatility, i.e. the volatility of the stock itself over the past 10 days. And that's rising, but well off the March highs. In fact, the Oct. options are assuming the extraordinary stock volatility we see right here, right now will persist for 3 more month's.
Now no reading is perfect. I suspect the 10 Day calculation underestimates the volatility you see actually trading this thing now. It only considers the day's range, not the way it got there. So in other words a 20 point range in one direction goes into the calculation just the same as a 20 point range that saw SKF round trip up and back 10 times from high to low. But the pattern is closer to the latter than the former. Yesterday for example SKF went up 20, then all the way to down 10 before finally closing up 10. The range was 30ish points, but the round trips felt like 70 points.
Still, this all won't last forever. I have no position after Friday. But If I want to buy paper, I will look at the nearer month's, and if I want to sell it, I will look out in time.
9 comments:
Gee, Adam, when you take your gaze off of these unattainable French anchorwomen, you actually, you know, say stuff.
(Sorry to burst your bubble, but Melissa has no idea of your existence. Constrast that with my close-close-close relationship with Charlize Theron!).
Anyhoo, the options are the passenger in the seat are telling us that the accident up at the intersection ahead is going to be really really bad. The market, the driver, is about two and half seconds behind in perception so the adrenaline pumping gut wrenching fear has yet to actually kick in.
But the accident has yet to happen. We may be able break ahead of it, accelerate around it...or maybe the crash of metal and shattering of glass is just a foregone conclusion
Hey Adam, how is the look this week? Bullish as ever?
karl: or we get a rally, lol.
Nate: Sadly, he does not bless us with the Look any more. Hard to believe no one actually makes a firm decision on Wednesday ab out what they might do with their options on Friday.
This SKF really looked like a blowoff top at the close yest.
Yep, now we know, short etfs blow too.
that was some run in the last few minutes. You do get extreme swings like that at turns. We'll see.
That SKF move today was unreal. Never sell high gamma right? lol
Looks like going long of the UYG yesterday is gonna pay for fall semesters tuition, :)
that's some move in these pups, wow. It's classic bear market behavior, just an unbelievable rip when it goes the other way. If nothing else, it's a great argument why all the anti-short vitriol is moronic. How did financial shorts work today?
UYG isnt tracking the XLF very well. did the numbers and it wasnt up nearly as much as SKF was down. cant wait for SKF to get back down to $85...then load up again.
it actually tracks IYF, so it's possible XLF and IYF had some slight divergence.
There is a level of IYF where UYG is essentially "called". It happened in a couple of those oil Short Doubles. So maybe that kept it higher than it would have been, and ergo didn't lift as much off the bottom.
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