U.S. OPTIONS/Vols dip but remain historically high
CHICAGO, Sept 8 (Reuters) - Implied volatility on S&P 100 options dipped on Tuesday as the index staged a
powerful recovery, but vols remained at historically high levels giving bulls reason to pause, traders said.
By 1113 CDT/1613 GMT, the Market Volatility Index , which measures implied volatility of several strikes on OEX
options, was down 3.07 points, or almost 7 percent, to 41.54.
The OEX was up 10.92 points, or about 2.3 percent, to 488.36.
''The vols slope is inverted and you can say two things about that for sure. One is that market makers are expecting extreme volatility in the market in
the near term, and the other is that it is unlikely that we'll be able to sustain a rally,'' said one index options trader.
Larry McMillan, president of volume and options tracking group McMillan Analysis, said he was waiting for more signs to confirm that today's rally
would continue.
''The S&P futures option put-call ratio has flopped over to a buy signal, but none of our other indicators have yet,'' he said.
He noted that recent upward gaps at the open have been sold hard, adding to the bearish sentiment.
''One of these days, that gap opening is going to hold...but right now this market is just too volatile to trade without our intermediate-term signals being
in accord,'' McMillan added.
Jerry Hegarty, OEX analyst with Thomson Financial Services and editor of Hegarty's Options Navigator, noted that every rally since July 17 has been
short-lived, but today's rally could carry over into Wednesday because of extremely high put volumes. |
