Daily Options Report

Bought some September gamma in SSO yesterday. It was not really to open, rather to close out a combo where I was short calls in SSO and SDS. The SDS calls are closing in on wallpaper status, so I have been buying strength here and there in SSO stock to hedge the short SSO calls. In light of both the volatility dip and the market (sort of) ramp, changed course a little and went long SSO puts instead of short calls.

Now I'm not bullish on options volatility at this point, it's more a *bet* on realized volatility between now and Septemer expiration. At 19 or so, volatility for ATM's, I just think it's a reasonable price for a little action next week, and I don't want to be short it any more.

As to that VIX and the 10 Day SMA, it did not quite close 10% below, so no *trigger* just yet. That being said, there's nothing magical that happens at 10% that doesn't happen at 9.5% or 9%. As we all know, it's an instrument that generally mean reverts, so a "stretch" away from an MA usually resolves fairly quickly. Of course it can resolve by simply sitting in a range for a few sessions too. And that's what seems to happen when it's a countertrend trigger, like this one.

The behavior this week does seem odd though. Classically, you would expect cheaper VIX headed into a holiday weekend. followed by *strength* after that is really less than it appears. Well, we got that Tuesday, but it has gotten clocked the last 2 days. So basically we spent all of August worried about a post-Labor Day market implosion, but then when it didn't happen on Day 1, those worries are now gone? Just odd. I don't think it's complacent so much as belated acknowledgement of reality. It's a slow motion, low volatility rally.