Today's Early Look by Keith McCullough shows Tier 1 Alpha's chart on Implied Volatility, which declined by 7.5 vol points yesterday.
Here was The Setup going into one of the busiest Macro Tourist days every month:
- Headline INFLATION (CPI) was going to be reported before the U.S. market open at 8:30am ET
- Short-Dated Equity Implied Volatility ramped to 22.91 (in a day!) … then
- CPI was reported in-line with expectations, and voila … Implied Vol got smoked again!
IMPLIED Volatility is what the options market is “pricing in” (in terms of expectations) on how volatile the PRICE of the underlying security could be in the future.
A 2-4 point move in super-short-term volatility is big. A 7-point drop in a day is a monster move!
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