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The VIX moves lower despite some broad-market weakness
Steve Claussen is the Chief Investment Strategist for OptionsHouse. His 26-year career in the derivatives industry took him from the Chicago Board of Trade to Wachovia and eventually OptionsHouse. November 24, 2009 3:03 EST Related Symbols: VIX
Volatility sellers are apparent today in the face of the market weakness as the CBOE SPX Volatility Index (VIX) has reversed earlier gains and is now below the 21% mark. The market has spent most of the day in negative territory with weakness across the board likely due to a stronger dollar, leading to lower crude oil prices hitting the energy sector.
To me, however, the story is that in spite of the weakness in the markets, the VIX is lower, indicating sellers of option premium in the S & P 500 Index on which it is derived. It has been a quiet day in the SPX pit itself but I have been shown only offers coming out of the pit. Given the Thursday holiday and the half-trading day on Friday the weakness in implied volatility could be expected.
However we will have the release of the November 4th FOMC meeting minutes later today, which could provide an excuse for the afternoon direction. Also Friday we will have anecdotal evidence coming in as the holiday retail season kicks off with Black Friday.
Sellers of premium ahead of the expected long weekend of decay may be surprised if those premiums do not decay as expected. That said, it doesn’t appear that many traders are willing to step up and own options through what currently looks to be an extremely quiet five days ahead.
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