Friday, April 29, 2011
Wednesday, April 27, 2011
Monday, April 25, 2011
Wednesday, April 20, 2011
Forget The VIX: SKEW Tells The True Story About Hedging Market Risk
Once again retail is getting duped into believing that all is well in the market by daily blasts of just how low the VIX has plunged. And it has: it is down to levels not seen in years. But as everyone who has done even a little work in option vol, the only index that matters these days, at least for equities now that precious metals and certain currencies (CHF) are the true flight to safety, is the SKEW. As we have disclosed many times in the past, SKEW is how the pros play vol, while VIX is what is left for the peasantry and CNBC. Basically, VIX shows riskiness as implied by ATM options, while SKEW demonstrates the difference between ATM and OTM options. And as the chart below shows, there is a rather dramatic difference when looking between the VIX and SKEW indices. In essence what is happening is that everyone is selling ATM short-dated vol and buying mid-term Out of the Money vol as expressed by the SKEW, in a confirmation that the protection cost in the wings is actually much higher than one would assume.
The CS Fear Barometer measures investor sentiment for 3-month investment horizons by pricing a zero-cost collar. The collar is implemented by the selling of a 10% OTM SPX call option and using the proceeds to buy an OTM put. The CSFB level represents how far out-of-the-money that SPX put is. The higher the level, the greater the fear."
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The CS Fear Barometer measures investor sentiment for 3-month investment horizons by pricing a zero-cost collar. The collar is implemented by the selling of a 10% OTM SPX call option and using the proceeds to buy an OTM put. The CSFB level represents how far out-of-the-money that SPX put is. The higher the level, the greater the fear."
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Tuesday, April 19, 2011
Sunday, April 17, 2011
Thursday, April 14, 2011
China's Economic Data Leaked
Completing the trifecta of posts focusing on China, here is the (un)official leak of Chinese GDP data to Phoenix TV which is due out at 10 pm. In the past this has been roughly 100% accurate. So without further ado...
RTRS-CPI 5.3-5.4% (BBERG est is 5.2%)
RTRS-PPI 7.4% (BBERG est is 7.2%)
RTRS-IP 14.8% (BBERG est is 14%)
RTRS-RETAIL SALES +17.4% (BBERG est is 16.5%)
RTRS-FIXED ASSET +25% (BBERG est is 24.8%)
* GDP also appears to be coming at 9.4%
And this is the inflationary environment in which Chinese home prices are plunging and China is once again loosening...
Budget deal cuts this fiscal year’s deficit by just $352 million, not $38 billion touted
A new budget estimate released Wednesday shows that the spending bill negotiated between President Barack Obama and House Speaker John Boehner would produce less than 1 percent of the $38 billion in promised savings by the end of this budget year.
How Washington Cuts $38 Billion in 5 Simple Steps:
1. Announce spending bill that claims $38 billion in cuts
2. Wait for CBO to announce it only cuts $353 million1
3. Realize you only do 0.0093% of what you say2
4. Divide $38 billion by 0.0093% to get necessary target3
5. Round to the nearest trillion and announce result
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Monday, April 11, 2011
Sunday, April 10, 2011
Friday, April 8, 2011
Tuesday, April 5, 2011
Nasdaq 100 Rebalancing To Reduce Apple Weighing From 20% To 12%
In a move likely to ripple across the stock market, Nasdaq OMX plans to announce Tuesday a rare rebalancing of its Nasdaq-100 index, which will reduce the big weighting of Apple Inc. The company currently makes up more than 20% of the index.
The rebalancing was driven in part by the seemingly unstoppable rise in Apple shares, which are up more than fourfold in the past two years. The tech company's big weighting means that a change in fortune for the maker of iPhones, iPods and iPads has a huge impact on one of the most heavily traded indexes in the market. After the rebalancing, which takes effect May 2, Apple will make up 12% of the Nasdaq-100.
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