{"id":7922,"date":"2021-11-10T21:21:11","date_gmt":"2021-11-11T02:21:11","guid":{"rendered":"https:\/\/navesinkinternational.com\/?p=7922"},"modified":"2023-12-20T02:53:21","modified_gmt":"2023-12-20T07:53:21","slug":"market-up-vol-up","status":"publish","type":"post","link":"https:\/\/navesinkinternational.com\/2021\/11\/10\/market-up-vol-up\/","title":{"rendered":"Market up, vol up"},"content":{"rendered":"<p>When the market goes down, volatility has a tendency to go up (the implied for sure). In other words, volatility and spot are anti-correlated. But it&#8217;s not always the case. We are currently in the unusual market situation called &#8220;market up, vol up&#8221;, where volatilities go up while the market rallies.<\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-7929 aligncenter size-full\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/SPX-vs-VIX-e1636595917392.jpg\" alt=\"SPX-vs-VIX\" width=\"650\" height=\"395\" \/><\/p>\n<p>The usual explanation is to assume that market participants become worried and are assuming a downturn soon. The current market valuations surely defies logic for many professional investors. Although is not cheap, it is not the reason this time.<\/p>\n<p>Instead, there is a buying pressure for calls, notably in the meme stocks, driven by FOMO. A few stocks have rallied significantly on better-than-expected results and investors are afraid of missing the next gap up.<\/p>\n<ul>\n<li>It shows in the implied of <span style=\"text-decoration: underline;\">small lot call<\/span> trades:<\/li>\n<\/ul>\n<p><img decoding=\"async\" class=\"wp-image-7926 aligncenter size-full\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Premium-small-lot-calls.jpg\" alt=\"Premium-small-lot-calls\" width=\"450\" height=\"290\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Premium-small-lot-calls.jpg 450w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Premium-small-lot-calls-300x193.jpg 300w\" sizes=\"(max-width: 450px) 100vw, 450px\" \/><\/p>\n<ul>\n<li>And a rally of the 1M implied vs longer maturities, while the tiny calls are in demand:<\/li>\n<\/ul>\n<p><img decoding=\"async\" class=\"wp-image-7927 aligncenter size-full\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/IWM-1M-10D25D-ratio.jpg\" alt=\"IWM-1M-10D25D-ratio\" width=\"450\" height=\"316\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/IWM-1M-10D25D-ratio.jpg 450w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/IWM-1M-10D25D-ratio-300x211.jpg 300w\" sizes=\"(max-width: 450px) 100vw, 450px\" \/><\/p>\n<p>&nbsp;<\/p>\n<h4>Reference<\/h4>\n<p>Bloomberg, November 8, 2021:\u00a0 <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2021-11-08\/options-craze-is-rewriting-rules-of-vix-s-p-500-relationship\" target=\"_blank\" rel=\"noopener\">Options Craze Rewriting Rules of VIX, S&amp;P 500 Relationship<\/a> (below), itself inspired from a Susquehanna research note.<\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-7928 aligncenter size-full\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Bloomberg-options-craze-is-rewriting-rules-of-vix-s-p-500-relationship-scaled.jpg\" alt=\"Bloomberg-options-craze-is-rewriting-rules-of-vix-s-p-500-relationship\" width=\"548\" height=\"2560\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Bloomberg-options-craze-is-rewriting-rules-of-vix-s-p-500-relationship-scaled.jpg 548w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Bloomberg-options-craze-is-rewriting-rules-of-vix-s-p-500-relationship-64x300.jpg 64w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Bloomberg-options-craze-is-rewriting-rules-of-vix-s-p-500-relationship-219x1024.jpg 219w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Bloomberg-options-craze-is-rewriting-rules-of-vix-s-p-500-relationship-329x1536.jpg 329w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/11\/Bloomberg-options-craze-is-rewriting-rules-of-vix-s-p-500-relationship-480x2242.jpg 480w\" sizes=\"(max-width: 548px) 100vw, 548px\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>We are currently in the unusual market situation called &#8220;market up, vol up&#8221;, where volatilities go up while the market rallies. It is driven by retail purchases into the tiny calls, notably for the small caps and the meme stocks.<\/p>\n","protected":false},"author":1,"featured_media":7929,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14,12,11],"tags":[35,17,41,100,18,72,38],"acf":[],"_links":{"self":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7922"}],"collection":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/comments?post=7922"}],"version-history":[{"count":2,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7922\/revisions"}],"predecessor-version":[{"id":13133,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7922\/revisions\/13133"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media\/7929"}],"wp:attachment":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media?parent=7922"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/categories?post=7922"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/tags?post=7922"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}