The Weekly Options News Roundup – 8.1.2014

The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast and online and social media outlets.

Using VIX for Protection

While the CBOE Volatility Index (VIX) remains below its historical average of 20, Russ Koesterich, Chief Investment Strategist of BlackRock, suggests investors utilize the VIX as a matter of protection even in times of calm.

“BlackRock’s Koesterich Says Buy Volatility During Market Calm” – Meghan Morris, Bloomberg

http://bloom.bg/1s7ezjw

Signs of Anxiety are Returning to the Stock Market

The VIX Index rose from seven year lows in July, due to unrest in regions around the world. With the threat of changes in monetary policy by central banks, along with this global instability, volatility is expected to continue to increase.

“VIX July Gain Tops 8% as Ukraine Jolts Record S&P 500” – Callie Bost, Bloomberg

http://bloom.bg/1AtIjuY

How Will VIX React to a Fed Move?

“So, what actually happens once the Federal Reserve begins to tighten monetary policy? The answer from the market’s volatility index historically has been, Not much…”

“Once Hawks Take Flight at the Fed, VIX’s Feather’s Won’t Ruffle” – Brendan Conway, Barron’s

http://jlne.ws/1o59qaa

Fear?  What Fear?

In a recent survey, nearly 50% of financial professionals said that “investors are too complacent given historically low volatility levels” and that most do not expect to see a sharp rise in volatility through the end of the year.

“Amid Sleepy Markets, Survey Suggest Investors Complacent About Volatility” – Chris Dieterich, The Wall Street Journal

http://jlne.ws/1o5bHlK

CEO Outlook 2014

As we reach the midpoint of 2014, CBOE CEO Edward Tilly spoke with Markets Media and shared his thoughts on the first half of the year and what lies ahead for the remainder of 2014….

“Summer C-Level Series: Ed Tilly” – Terry Flanagan, Markets Media magazine

http://bit.ly/1oQLact

Alums in the C-Suite

Some companies have CEOs and CFOs that hail from the same university, including CBOE.  How does this dynamic influence management styles and working relationships?  CBOE CEO Edward Tilly and CFO Alan Dean find that this connection helps “sync” their thinking, except when it comes to their Chicago baseball rooting interests…

“When CEOs and CFOs Share an Alma Mater” — Maxwell Murphy, The Wall Street Journal

http://on.wsj.com/1mzyhy2

Career Advice

CBOE, along with several other Chicago financial institutions, hosts a summer intern program for youth seeking to break into the financial industry.  CEO Ed Tilly, along with executives from other financial firms and exchanges, spoke to the interns at an event hosted by John Lothian Newsletter.

“Trading Experts’ Advice: Embrace Change” – Thomas Dixon, Futures magazine

http://bit.ly/1pJ3rF6

 

Blogging Options: CBOE Mid-day Update 8.1.14

Active morning at CBOE, as 5.1mm contracts trade. SPX 690k, VIX options 960k and VIX Futures with 322k volume.  Volatility as an asset class:

Volatility indexes have spike today as stock indexes have traded lower

Proshares VIX Short-Term Futures ETF (VIXY) is up 4.8% to 22.07; compared to its 50-day moving average of 20.04.

Proshares VIX Mid-Term Futures ETF (VIXM) is recently up 1.2% to 15.72; compared to its 50-day moving average of 15.75.

iPath S&P 500 VIX MD-TM FT (VXZ) is up 1.3% to 12.85; compared to its 50-day moving average of 12.88.

Velocity Share VIX Short Term ETN (VIIX) is recently up 5.3% to 44.90; compared to its 50-day moving average of 40.65.

Velocityshares Daily 2X VIX Short Term ETN (TVIX) is recently up 10.7% to 3.85; compared to its 50-day moving average of 3.31.

ProShares Ultra VIX Short-Term Futures ETF (UVXY) is up 10.7% to 35.07, compared to its 50-day moving average of 29,73.

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently up 0.9% to 19.77; compared to its 10-day moving average of 13.62. stks.co/r0CS2

CBOE DJIA Volatility Index (VXD) up 4% to 16.37; compared to its 10-day moving average of 12.75.

CBOE Nasdaq-100 Volatility Index (VXN) up 6.3% to 17.85; compared to its 50-day moving average of 13.51.

Actives at CBOE:  AAPL TSLA C NFLX TWTR AMZN LNKD X FB

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Weekly Market Commentary 8.1.14

The genie is now out of the bottle, and it’s going to be very hard to put
him back in again. $SPX has broken major support at 1950, and that changes
things: the chart of $SPX is no longer bullish; it is now bearish.
spx 7 31

Equity-only put-call charts continue to remain on sell signals.
These put-call ratios will remain bearish until they
roll over and begin to trend downwards.  It doesn’t appear that will
happen anytime soon.

Market breadth (advances minus declines) was a harbinger of this
move.  Both breadth indicators are on sell signals and
are deeply into oversold territory.  However, the market can
decline while these are oversold, so these are not buy signals.

This now brings us to volatility.  As one might expect, volatility
literally exploded yesterday. $VIX is now in an uptrend, and that is
bearish for stocks.
vix 7 31

In summary, all of the indicators are negative.  There are some
oversold conditions beginning to appear, but there are no buy signals
at this time.

Blogging Options: CBOE Morning Update 8.1.14

Big day in the options world yesterday.  ~26mm contracts change hands with 8mm trading at CBOE.  SPX showed 1.44mm and VIX with 1.34 mm contracts.  VIX Futures had a robust 374k trade.  VXST up sharply.

This morning, NFP for July with a gain of 209k jobs.  227k to 230k gain was expected.  Unemployment rate rises to from 6.1% 6.2%.  May and June with slight revisions higher in jobs added.  Participation Rate up one tick to 62.9%. DJIA Futures had been off ~120 points, now unchanged.  DAX off 1.75% before jobs numbers, rest of Asian and European stocks lower. Scientific Games in bid for Bally. 10-year 2.54%.

Volatility as an asset class

Tesla Motors (TSLA) is up $2.20 to $226.34 in the premarket after reporting Q2 results and announcing that it broke ground on a possible Gigafactory location in Reno, Nevada.  August call option implied volatility is at 60, September is at 49, December is at 46; above its 26-week average of 52.

LinkedIn (LNKD) is higher by $13.46 to $194.10 after reporting better than expected Q2 results and guidance for Q3 and fiscal 2014. August call option implied volatility is at 58, September is at 47, November is at 41; compared to its 26-week average of 48.

Expedia (EXPE) is up $2.26 to $81.68 in the premarket after reporting Q2 results above analyst estimates and raising its quarterly dividend. August call option implied volatility is at 60, September is at 43, January is at 34; above its 26-week average of 37.

Options expected to be active @ CBOE: BYI SGMS PCLN WWWW NFLX TSLA GPRO MT LNKD NVS DDD FB EXPE

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VIX Today – This Time It May Be Different

Today was a heck of a day in the equity markets. We got our biggest on day S&P 500 drop in a few months and the first down month for the S&P 500 since January (I bet you forgot the January Effect indicator was bearish for 2014 – I admit I did). The result was a spike in VIX, VXST, and moves higher in all other equity market related volatility indexes. Here are a few of the highlights (or low points depending on you were positioned coming into the day).

The CBOE Volatility Index –

VIX moved up over 27% which was the third biggest move to the upside in 2014. The front month future was up just over 12% and finished the day at a discount of 1.75 points to the spot index. If you throw spot VIX out of the equation, the term structure chart is actually in contango, which could be taken as a bullish signal for the equity market. The market has become conditioned to expect any spike in volatility to be short lived and that is apparent when you look at the blue line below, of course excluding spot VIX. A couple of weeks ago VIX moved up by over 30% in a single day, but was back down below 12 in less than a week. That is the sort of pattern that traders have come to expect and may explain the August discount to spot. Keep in mind we have an employment report tomorrow that probably has some market participants nervous. Looking at the August VIX future price today I would say those that are nervous into tomorrow’s number are in the minority.

VIX Curve  More

VXST Futures and VIX Index Both Rose More Than 26% Today

In a July 26 piece that now looks as if it could be rather prescient, in last weekend’s Barron’s, Steve Sears wrote –

“BlackRock, the world’s largest asset-management firm, is telling clients that equity-options volatility is now the last cheap asset class in the financial market. With the CBOE Volatility Index (VIX) at about 11.50, around half of its long-term average of 19, BlackRock is telling clients that the measure should be in the mid- to high-teens. This view is consistent with our previous recommendations that investors buy volatility in anticipation of VIX increases in reaction to shifting Federal Reserve monetary policy or continuing geopolitical instability in Ukraine and the Middle East. …”

CHART SHOWING SIX TRADING DAYS

The chart below shows that the VIX spot Index and VXST futures (expiring on Aug. 6) both moved pretty closely in tandem.

VXST chart for 7 31  Blog

TABLE

The table below shows today’s price moves for CBOE’s 26 volatility indexes and the near-term VXST futures.  Both the VIX spot index and the VXST August Week 1 futures rose more than 26.1% today.

Table July 31 Blog

To learn more about futures and options on several volatility indexes, please visit www.cboe.com/volatility.

 

Weekly Weekly’s for 7.31.14

It’s been a wild week for earnings and it’s not over yet!

Let’s look at Weekly options set to expire this Friday, August 1st and next Friday August 8th.

Turning in earnings today three big names: LinkedIn, Gopro and Tesla.

I’m starting with LinkedIn in the wake of Twitter taking off on much better than expected earnings. LinkedIn options expiring Friday, as the stock trades $185, implied volatility is very high at 180.   It appears trades are mostly calls spread strategies with calls robust in the 190 & 200 and 210 strikes and puts at 162 & 165 and then again at 177. Traders also like to play Weeklys and traditional options and there are 200 traditional calls active in LNKD. Volatility is high in LNKD. The 185 straddle suggests a 7.8 percent move as it prices in at $14.50.

GOPRO comes out with its first earnings report tonight since going public. It’s mostly calls that are active at the 44, 45 and 50 strikes and so far there is not much interest in the puts. The straddle is shifting around and is currently suggesting a 10 percent move up or down on earnings.

Tesla is likely to gain in trading volume throughout today’s session going into earnings tonight. TSLA is trading around $229. Calls in multiple strike are active up to 270 and puts down to 190. There are more calls than puts trading which could be a sign Tesla will beat on earnings or the shorts are looking for cover.  tHE TSLA Straddle predicts a 9 percent move.

Friday morning Procter and Gamble (PG, $77.50) reports earnings and a mini move is projected by the options of about 1.6 percent. But, anything is possible this earnings season.

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CBOE Mid-Day Update 7.31.14

Volatility as an asset class

Yum! Brands (YUM) is recently down $4.05 to $68.95 after the company disclosed a “significant negative impact to same store sales” in China due to the latest China food supplier issue. August call option implied volatility is at 22, September and January is at 19; compared to its 26-week average of 21.

L-3 Communications (LLL) is recently down $18.35 to $101.17 following the announcement of the Aerospace segment internal accounting review and the $84M pre-tax charge. August call option implied volatility is at 33, October and January is at 23; compared to its 26-week average of 19.

T-Mobile (TMUS) is recently up $2.08 to $33.05 after France’s Iliad (ILIAF) confirmed interest in T-Mobile. August call option implied volatility is at 29, September is at 33, November is at 27; compared to its 26-week average of 35.

Actives at CBOE:  AAPL TSLA GILD C WFM NFLX RFMD TWTR AMZN

Stocks with increasing volume @ CBOE:  TMUS S TSLA MU GPRO EXPE HIMX

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently up $4.46 to 17.75; compared to its 10-day moving average of 12.66. VXST is a market-based gauge of expectations of 9-day volatility stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) down 2.96 to 266.51, compared to its 50-day moving average of 268.13 cboe.com/micro/bxd/

CBOE Volatility Index (VIX) up 2.70 to 16.03. VIX August 13, 16, 17, 18 and 20 calls are active on 721K contracts @ CBOE cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) up 6.6% to 31.

CBOE DJIA Volatility Index (VXD) up 2.33 to 15.03; compared to its 10-day moving average of 12.20.

CBOE Nasdaq-100 Volatility Index (VXN) up 2.54 to 16.47; compared to its 50-day moving average of 13.43.

S&P 100 Options (OEX) recently is recently down $12.42 to 864.50 following the lead of international markets that were also lower overnight after Argentina defaulted on its debt.

Blogging Options: CBOE Morning Update 7.31.14

Weekly Jobless Claims came in slightly higher than consensus at 302k, but the Employment Cost component jumped the most in 6 years.   The FED tapering by $10b had little effect on markets yesterday afternoon.  XOM off $1.50 after reporting earnings up 28% and a beat in Quarterly revenue.  Decent volume yesterday with CBOE trading 4.9mm of 17.6mm options traded.  Futures jittery this morning.  European stocks lower, Banco Espirito Sancto lost $3.5B Euros last quarter and talk of deflation in Europe. 10-year ~2.59%.  VIX Futures trade 21k this morning in extended hours session. Volatility as an asset class

Yelp (YELP) is down $4.71 to $70.75 in the premarket after reporting stronger than expected results. August weekly call option implied volatility is at 186, August is at 75, September is at 61, January is at 52; compared to its 26-week average of 62.

Akamai (AKAM) is off $3.73 to $57 after the online distributor reported a Q2 profit increases of 18%. August weekly call option implied volatility is at 144, September is at 39, January is at 31; compared to its 26-week average of 35.

Whole Foods (WFM) is down $2.08 to $37.03 in the premarket, earnings beat by $0.01 butafter guidance was below expectations.  August weekly call option implied volatility is at 99, August is at 44, November and January is at 29; compared to its 26-week average of 33.

CBOE Equity Options Volume on July 30: 1,175,991 calls, 673,820 puts, 1,849,811 total CBOE.com

Options expected to be active @ CBOE: ALU YELP TWTR HOS APA MA DDD YELP GOOG GOOGL MU WFM GLUU HOLX

CBOE SKEW INDEX (SKEW) at 140.54, below 50-day MA of 131.73. SKEW measures the purchase of out-of-the-money S&P 500 Index puts that require a very large downside move to profit from long put positions. An increase of this index indicates greater expectations for an extreme down move.

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