The big surprise for me is the lack of interest in volatility into the NFP on Friday.? VIX notched its 5th?straight decline going into a big number which is something I don?t remember happening in the QE period since the first talk of taper began.? VIX could easily pop back up today, but for now I would not trade it.?
Names like GOOG are putting in big moves.? There was a slug of movers yesterday, and GOOG was not an exception running almost 2% from the closing price yesterday.? The familiar pattern of low pre-earnings volatility kept the GOOG Jan Weekly volatility in the 15% range.? That is less than a 1% move per day on average.?
LivevolX (r)?www.livevol.com
If you survey the bigger stocks like NFLX, PCLN and AAPL, the daily moves prior to earnings have been much bigger than the implied volatility is showing.? I think this will be a continued trend for the year as money concentrates on the big names and the index volatility starts to subside.
The Trade
Long ratio call spreads in the big name stocks where you buy more just ATM calls and sell just ITM calls to leave a net long contract count (think long 3 and short 2).? Keep the hold time short to minimize the risk.? Only consider stocks where the 2 week IV is trading under the IV30 lows of the year.
Disclosure: I have a position in GOOG