Where is the Vol?

The SPX tanked today.  This was big news everywhere…or was it?

Ask anyone in the Pit of the SPX and they will likely tell a different story.  One where put options were offered all day.  One where panic never really occurred and the sell off wasn’t just orderly, but almost appeared organized.  Basically, there was NO demand for insurance from the general market place.  Take a look at how little Feb vol moved today, and where it is relative to the last 5 days.

Tick chart - ^SPX - Standard & Poors 500 Index_window_screenshot.png

Livevol (R)

Notice that the SPX tanked, and that at no point in the day was there any spike in volatility.  Basically, this means that the only reason the VIX was higher was because of movement down the skew curve and not a true increase in IV’s.  Essentially, if one was long vega today and traded gamma dynamically,  one didn’t make money today.  This makes sense, considering EVERY dip has been bought, I would need to see some follow through before I would get nervous.

The Trade:

I feel like  the market is is a little too complacent.  I am looking for some follow through tomorrow, it is at that point we could see a move higher in IV’s.  I would hold off on any sale of vol until VIX (cash 13.28, Jan VIX Future 13.77 which settles Wed. 1/22) breaks 14.5 which could happen tomorrow.