The VIX made a huge .40 point drop in the last 5 minutes of trading today... Any ideas why? Is someone bullish on tomorrow's employment report?
More than likely "they" wanted to short gamma/vega more than simply making a direct play on the report. $.40 is quite a move with vols this low, but not rare. Remember that the VIX is updated when trades are made, and a lot of these strikes aren't terribly active. Most of the action is in atm strips out to 30 deltas. There is a lot of early-bird weekend markdown of vols due to the weekend decay. The street has to mark down vols since they can't compress time.
Of course! Everyone knows that Friday is Dream Day. Or can you remember any report which was bad in the last 5 years?
Did the big VIX drop at yesterday's close forecast a nice market rally? Well it sure looks like it. Has anybody ever seen this scenario before?
There is no clairvoyance here. It's simply a play into the post-release vol drop. Do you think it's coincidental that we saw a drop in VIX before a pre-open econ release coupled with the weekend?
If anyone's interested, the VIX rose .24 in the last 5 minutes of trading today. The last big late move (as noted above) in the VIX was followed by an 11 point gain in the S&P the next day. Don't know if today's jump up was big enough to forecast a 10pt drop in the S&P for tomorrow, but it was interesting. S&P Futures already fell over 4 points in after hours trading. cheers,