Daily Options Report this morning showed a video from optionMonster discussing the VIX options with two weeks to go show higher volatility than at the same point in May.
-
Jamie here notes something interesting. June volatility is about 15 points higher than it was in May at about this juncture in the expiration cycle.
Well it was 15 points higher. Jamie also notes some sellers in the June calls knocking it down a bit to about 10 points higher.
But let me just clarify something first, since this is the most difficult product to explain, ever. Jamie is referring to volatility OF the VIX options, not VIX itself. In other words an ATM option on the VIX, call it the June 30’s, is trading 15 volatility points higher than a comparable May VIX option was trading with 2 weeks or so to go until expiration.
Got that?
The VIX measures volatility expectations for the SPX. VIX options measure volatility expectations of that volatiltiy expectation. So it’s a bit rough to analyze what exactly that means.
I missed it when I was watching the video.
What does it mean? An increased uncertainty about how much SPX could move around. Take it to the extremes and see what it means. If the vol of the VIX were zero, the market knows exactly how much SPX will move around in the next month. If VIX vol were 100% the market is biting its nails expecting big changes in how much the SPX moves.
0 Responses
Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.