The Earnings Surprise Taking VIX For A Ride

The Option Pit VIX Light Is Yellow: Volatility Is Going To Move.

Hey Traders,

Well, I would say that Amazon (Ticker: AMZN) caught the market by surprise:

The stock is getting crushed, and it is sending reverbs throughout the whole market.

Here is what happened, and its ramifications for the VIX.

You might not know this but there is actually a VIX for Amazon … CBOE Amazon VIX (Ticker: VXAZN).

And I will say this, the VXAZN did NOT see AMZN’s post-earnings move coming. 

Check out the chart of VXAZN at the close on Thursday:

That’s right. Heading into earnings, volatility was down, not up.

The Amazon earnings straddle was only about $100:

When a HUGE company has earnings that bad, it can send shockwaves across the market.

And we are seeing that today with the VIX up 0.75 into the weekend.

That said … these things do tend to wane quickly. 

While AMZN could be due for a rough couple of weeks, I think we will see the VIX drop, despite my belief we could see the VIX make a run at 25 in the next month.

I would be a buyer of ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) puts as we head into the weekend.

The Aug. 6 27.5-strike puts are a little over $1.00; there is value there.

Speaking of value … Frank and Andrew were dishing out some tasty morsels of trading knowledge last night.

Spilling hedge fund secrets left and right … these guys were really getting into it, and if you were there, you probably walked away with a few valuable new ideas to implement into your own trading.

If you missed it … you can watch the replay here.

Or find out more about how to get maximum value out of Andrew and Frank right here.

Your Only Option,

Mark Sebastian

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