Stocks have been making small gains over the last two days as the great tech sector rotation has moved from the new tech stocks back to the old tech stocks. The high fliers in 2000 are starting to fly again and the Young Turks in social networks have taken it on the chin as they drop like Icarus from the sky.
The net effect on volatility has been muted. VXN has spiked into the 20s but has since settled down. The 10 day realized volatility in SPX is down below 10% again. What is playing out is the one side of the market is rallying and the other side is getting soft. As of today, that action is starting to level out.
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Funny enough, that has compressed the VIX and the vol. products somewhat. UVXY is trading at the lowest level for the year. Considering the rout in some areas of the market this is remarkable. Volatility is getting to very low levels which is starting to take one side of the products out. The vol products can decay, but VIX at 13 has proven remarkably resilient.
Owning upside time spreads in the VXX or UVXY start to look pretty good here. There is some small downside but there should be a small bounce soon enough. You can set the time spreads to stay in sync with the decay. atg Follow Andrew on twitter @optionvol