Single Digit Vol Takes the Weekend

Andrew Giovinazzi

Yo Pit Crazies,

Feast your eyes below – all the sigmas, vol per term, are below 10. It’s the first time in three years!

IV tends to drop as stocks go higher, especially with all the calculated vols like Sigmas, IV, and IV30. That means vols on the upside should be cheaper due to skew.

Skew is the market pricing different strikes at different volatilities. It also assumes lower IVs on the upside.

In a go-go market, that’s not a bad thing.

Let’s see why.

Cheap Option Prices Move Faster When Stocks Move

While Twitter talking heads will debate when SPX will drop back to 4200 or 4300, the reality is stocks are on a relief run. From a trading perspective, bull markets tend to go in one direction slowly. That reads as a relatively low realized volatility. Remember, realized volatility is just how much the stock is moving close to close. Bull markets have sneaky high realized vol because they tend to trend higher for longer periods of time.

For now that’s what we have. It’s nuts to think next week’s options in SPX priced around .5% per day on average. That means the upside will be crazy low IV.

The lower IV decays slower – that’s a good thing in a bull market.

Join Mark and I on Thursday at 7 p.m. ET to learn more about riding a market like this.