Yo Pit Crazies,

At this point, Mark is calling the VIX the “No-Fear” gauge.

Speaking of no fear, the market for volatility is crumbling as we speak..

There is a trend to volatility, and right now that trend is down. 

See below the 30-day implied volatility chart in JP Morgan (Ticker: JPM). The bid for implied volatility has gone to the floor.

Two-year chart of JPM with 30-day IV in red and 30-day HV in blue.

Is this low bank vol the start of a new bull market?

JPM IV Is the Lowest in Two Years

What’s that about banks going out of business?

Well, some did but most did not. 

What really happened is that the Fed swooped in and provided instant liquidity so that it did not trigger a massive sell-off in bonds and other assets. 

Also, the financial crisis of 2008 was caused by mortgage backed securities that went totally illiquid and to 0, among other things.

Banks now are stuck with duration risk but their US Government bonds are not going to 0.

For now, stocks keep going higher in the absence of bad news and things not getting materially worse.

Inflation will go down if the government stops spending too much money. Sort of like the old days.

I do like some of the other banks that have not recovered, like BankAmerica Corp (Ticker: BAC). JPM would make good call calendars here.

If you want some Pro Content on how Volatility works Click Here.

The Rundown

The Trading Desk

iPath S&P 500 VIX Short Term Futures ETN (Ticker: VXX), SPDR S&P 500 Trust (Ticker: SPY) April 14 42 puts, 405 puts closed for a 3% gain

Power Income Trader

SPY April 21 416/417 call vertical spread closed for a 19% gain

To Your Trading Success,

AG