The Options Option Is Getting Expensive

Given how wildly volatile the markets have been of late, I was remembering back to what it was like in late 2006 when the VIX (a measurement of volatility in the markets) was bottoming out around 10. There was a span of less than 1% move days in the S&P 500 that David Merkel and I kept tabs on. My last post on that streak cited 92 days of the S&P 500 barely moving intraday in a row.

The markets have been putting on 2%, even 3% moves back and forth, higher and lower all the time these days. The traders who used to complain about how hard it was to make any money in the non-action, should be happy as pigs in mud right now. (Fact is, of course, most aren't, as the market always fools as many of us as it can as often as it can and most of the traders I know, as usual, are in pain). The Vix now spends its time in the mid 20s.

Since back in May of 2006, I've been a huge proponent of buying calls and puts, a buyer of volatility as it were. But as the volatility here hits extremes relative to years past, the premiums on options are starting to get awfully pricey. Better trading pitches are coming to swing at. But easy on the options for now.