The Weekly Options News Roundup – 10/31/14

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.

Volatility Playbook
Volatility in the market has been a constant reality over the past two months with triple-digit swings occurring regularly.  Investors, as a result, are utilizing options as insurance.

“Stocks: How to Play Defense “ – John Wasik, The Wall Street Journal
http://on.wsj.com/105SYgU

“How to Play a Chaotic Market” – Steven M. Sears, Barron’s
http://on.barrons.com/1xFjtF0

“Volatility Sellers of the World Unite and Take Over” – Chris Dieterich, Barron’s
http://on.barrons.com/1u9D1EE

VIX is Calmer…For Now
The CBOE Volatility Index has receded, down from last week’s highs and now hovering around the 14.  However, the wild ride may not be over.  Because of looming economic indicators, the VIX Index levels may be headed higher (again).

“Even As Volatility Continues, Sentiment Indicators Stagnate”- Rick Pendergraft, Moneynews
http://nws.mx/1wImEfW

“Hedge Fund VIX Wagers Tip Toward Turbulence After Selloff” – Callie Bost, Bloomberg
http://bloom.bg/1wNX2kj

More Volume to Come?
“A Tabb report recently surveyed more than 40 buy-side firms, with 70% expecting their listed futures trading volumes to increase over the next 12 months. This was down to a combination of increasing volatility and shift towards OTC alternatives.”

“Exchange-Traded Derivatives Trading Set to Soar” – Matthew Simon, The Trade
http://bit.ly/13kEP1y

“Q3 Options Volume Hits One Billion Contracts, Tabb Reports”– John D’Antona Jr., Traders Magazine
http://bit.ly/1rG0buO

A Fighting Chance
Video
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CBOE Mid-Day Update 10.31.14

Volatility as an asset class

Exxon Mobil (XOM) is recently up $1.44 to $95.87 on Q3 earnings increasing 2.5% on higher refining margins. November weekly call option implied volatility is at 15, December is at 14, January is at 13; compared to its 26-week average of 18.

Chevron (CVX) is recently up $1.41 to $118.65 on Q3 profit increasing 13% on asset sales. November weekly call option implied volatility is at 21, November is at 19, December is at 16, January at 17; compared to its 26-week average of 18.

Starbucks (SBUX) is recently down $1.74 to $75.76 after reporting Q4 sales rose 10%. November weekly option implied volatility is at 29, December and January is at 17; compared to its 26-week average of 22.

Actives at CBOE:  AAPL C BIDU PBR TSLA AMZN BMY GILD KO FB TWTR

Stocks with increasing volume @ CBOE:  ABBV CSCO PCLN NEM

CBOE Volatility Index (VIX) is recently up 1.6% to 14.77; November 17 puts & November 20 calls active on 129K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently down 52c to 30.62

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently up 98c to 14.99; compared to its 10-day moving average of 15.94 stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) is recently up 18c to 262.35 compared to its 50-day moving average of 265.32 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently up 7.06 to 803.12 on stimulus measures implemented by the Bank of Japan.

Blogging Options: CBOE Morning Update 10.31.14

BOJ cranked up QE again, pushing overseas shares higher.  Personal Income up 0.2% in September (+0.3$ August), Spending off 0.2%.  Omega bids for AVIV shares.  XOM earned $1.89 vs. $1.71, Chevron (CVX) reported a gain of $2.95 vs. $2.55.  CVX revenues dropped $3.5B for the quarter, both companies helped with downstream (refining) as oil prices fell.  XOM & CVX both higher in the premarket, and both are DJIA components. Halloween tonight, change your clocks (fall back) Saturday night.  Volatility as an asset class:

LinkedIn (LNKD) is up $16.10 to $219 in the premarket on better than expected Q3 earnings and unique visiting members. October weekly call option implied volatility is at 174, November is at 58, December is at 49, January at 43; compared to its 26-week average of 46.

GoPro (GPRO) is up $10.72 to $79 on Q3 EPS 12c, compared to consensus 8c. Q3 revenue was $280M, compared to consensus $263M. October weekly call option implied volatility is at 189, November is at 78, December is at 67, January is at 55; compared to its 13-week average of 60.

Groupon (GRPN) is up $0.51 to $6.50 in the premarket after reporting a Q3 beat and guiding Q4 below analyst estimates. October weekly call option implied volatility is at 120, November is at 71, December is at 65, January is at 54; above its 26-week average of 60.

Options expected to be active @ CBOE:  XOM CVX GRPO SBUX LNKD GPRO GLD

CBOE Crude Oil Volatility Index (OVX) at 30.45, compared to its 50-day moving average of 23.48 WTI Crude oil trades near $81. CBOE.com/OVX

CBOE S&P 500 Skew Index (SKEW) at 121.02, compared to its 50-day moving average of 129.82. 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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Next Week in Weeklys – Part 1 – November 3 & 4

Before we get to earnings, the one change to the list – Trinity Industries was added to the Weeklys list. Now on to a portion of earnings…yes a portion of earnings, I’m currently sitting in the San Francisco airport on my way to Los Angeles. I was only able to dig up data on stocks reporting Monday and Tuesday before I started my traveling adventure. When I return on Monday I’ll get the data for stocks reporting in the latter half of the week.

Earnings Part 1

CBOE Mid-Day Update 10.30.14

Volatility as an asset class

MasterCard (MA) is recently up $5.62 to $81.60 on better than expected Q3 results and outlook. November call option implied volatility is at 23, December is at 18, January is at 17; compared to its 26-week average of 24.

Weight Watchers (WTW) is recently down $4.51 to $24.91 on commentary of higher expenses and lower gross margins.  November call option implied volatility is at 41, December is at 35, January is at 34; compared to its 26-week average of 35.

Avon Products (AVP) is recently down 79c to $10.17 on larger than expected revenue decline. November call option implied volatility is at 39, December is at 37, January is at 36; compared to its 26-week average of 33.

VIX methodology for Amazon (VXAZN) is recently up 2.1% to 27.66, compared to its 10-day moving average of 36.48. cboe.com/VXAZN

Actives at CBOE:  AAPL PBR TSLA AMZN BMY GILD KO FB TWTR

Stocks with increasing volume @ CBOE:  NBR ARCP NEM AA WLT

CBOE Volatility Index (VIX) is recently down 2.9% to 14.72; November 16 & 18 calls active on 184K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently up 15c to 31.13
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Blogging Options: CBOE Morning Update 10.30.14

Q3 GDP came in at a 3.5% gain (+3.0% to +3.1% expected), but Personal Consumption dropped and the increase in government spending accounted for .85% to .9% of the rise.  US futures mixed to lower.  10-year 2.289%, oil lower.  Volatility as an asset class

Cirrus Logic (CRUS) is up $0.31 to $22.20 in the premarket after the high precision processing component company reported better than expected results. October weekly call option implied volatility is at 140, November is at 68, December is at 47, January is at 37; above its 26-week average of 41.

Visa (V) is up $10.74 to $225.40 following better than expected Q4 results and guidance. October weekly call option implied volatility is at 51, November is at 24, December is at 20, January is at 17; compared to its 26-week average of 22.

Akamai (AKAM) is down $1.27 to $54. in the premarket after posting Q3 earning growth of 14%. October weekly call option implied volatility is at 132, November is at 45, December is at 36, January at 32; compared to its 26-week average of 28.

CBOE Interest Rate 5 Year Note FVX @ 15.02, compared to its ten-day moving average of 14.61

Options expected to be active @ CBOE:  GLUU AKAM TTWO LNKD DWA V MA

CBOE Crude Oil Volatility Index (OVX) at 28.93, compared to its 50-day moving average of 23.23 WTI Crude oil trades near $82. CBOE.com/OVX

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Post Election VXEWZ Analysis

On Monday the Brazilian equity market reacted somewhat as expected to the re-election of Dilma Rousseff to another term as president of Brazil. When I say as expected, Rousseff is not considered very business friendly and her election resulted in about a 4% drop in the iShares MSCI Brazil Index ETF (EWZ).   This 4% drop was on top of EWZ being down 23% from the 2014 high as the election date approached and the equity market started to discount Rousseff’s re-election.

The equity market adjusted for the election victory, but one Brazilian oriented market hardly moved from Friday to Monday. That market was the VXEWZ futures. Last week, leading up to Sunday’s election and subsequent market reaction on Monday the spot VXEWZ Index was as high as the low 70’s. The index finished the week at 58.16 but as the market digested the idea of Rousseff in charge for another four years VXEWZ moved down over 26 points to finish Monday at 31.30.  The front month November VXEWZ futures contract finished last week at 27.75 and was down 0.35 to 27.40 on Monday – that’s a big contrast to the change in the index.  To illustrate the Friday to Monday price change the VXEWZ term structure from last Friday to this Monday appears below.

VXEWZ Friday - Monday

 

Note the big drop in the index while the futures hardly moved. The index indicated the implied volatility of options that were trading just before the election as traders put on speculative positions and investors may have hedged their Brazilian exposure. The futures on the other hand settle based on where 30 day implied volatility is at expiration. The November future was discounting much lower volatility as indicated by EWZ option pricing once the election was over. Those futures contracts are still at a bit of a discount to spot VXEWZ, but for the most part were a pretty good indication of the pending drop in implied volatility. I often like to emphasize that looking only at a volatility index and not including the futures markets will not tell you to whole story of implied volatility expectations. This past weekend VXEWZ and the respective futures pricing reemphasized that line of thinking.

CBOE Mid-Day Update 10.29.14

Volatility as an asset class

Electronic Arts (EA) is recently up $1.50 to $38.93 after the company’s Q2 earnings per share and revenue topped analysts’ estimates. November and December call option implied volatility is at 33 and January is at 31; compared to its 26-week average of29.

Gilead (GILD) is recently down $3.42 to $110.83 after the bio-tech company released earnings that missed analyst expectations. November weekly call option implied volatility is at 39, November is at 36, December is at 35, January is at 34; compared to its 26-week average of 33.

Anadarko (APC) is recently up $1.43 to $91.85 on Q3 revenue rose 30% from a year earlier.  November weekly call option implied volatility is at 45, November is at 36, December is at 37, January is at 35; compared to its 26-week average of 28.

VIX methodology for Amazon (VXAZN) is recently down 1.8% to 27.47, compared to its 10-day moving average of 38.72. cboe.com/VXAZN

Actives at CBOE:  AAPL PBR TSLA AMZN ARCP GILD CLF FB

Stocks with increasing volume @ CBOE:  KO TOL WYNN ORB ATK

CBOE Volatility Index (VIX) is recently up 8.2% to 15.57; November 21 & 25 calls active on 306K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently up 84c to 31.33

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently up 2.07 to 16.46; compared to its 10-day moving average of 18.62. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) is recently down 38c to 261.49 compared to its 50-day moving average of 265.59 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently down 1.92 to 880.26 into Federal Reserve statement.

Blogging Options: CBOE Morning Update 10.29.14

Stocks mixed to modestly higher as FOMC minutes to be released early this morning.  Volatility as an asset class

Facebook (FB) is down $4.37 to $76.35 following the company’s warning of a dramatic increase in spending in 2015 and projected slowdown in revenue growth this quarter. Facebook October weekly call option implied volatility is at 103, November is at 48, December is at 36, March is at 35; compared to its 26-week average of 38.

U.S. Steel (X) is  up $3.00 to $41.15 after reporting better than expected Q3 EPS. Overall option implied volatility of 64 is above its 26-week average of 35.

Wynn Resorts Ltd (WYNN) is up $3.85 to $189.55 after declaring a special dividend of $1.00 per share. Raising its quarterly dividend 20% to $1.50 per share and reporting better than expected Q3 results. October weekly call option implied volatility is at 57, November is at 32, December is at 29, January is at 26; compared to its 26-week average of 31.

CBOE Interest Rate 5 Year Note FVX @ 15.02 into Federal Reserve policy meeting decision.

Options expected to be active @ CBOE:  FB X GILD LNKD PNRA MAR ESRX

CBOE Crude Oil Volatility Index (OVX) at 30.11, compared to its 50-day moving average of 23.05 WTI Crude oil trades near $82. CBOE.com/OVX

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CBOE Mid-Day Update 10.28.14

Volatility as an asset class

The Medicines Company (MDCO) is recently up $2.94 to $25.13 after announcing the results of the pivotal Phase III clinical trial of the investigational hemostatic agent RAPLIXA, formerly known as Fibrocaps. November call option implied volatility is at 53, December is at 46, January is at 41; compared to its 26-week average of 45.

Cliffs Natural (CLF) is recently up $1.58 to $10.88 on Q3 results and said that it is looking for partners for phase 2 of its Bloom Lake mining project.  October weekly call option implied volatility is at 125, November is at 87, December is at 79, January is at 76; compared to its 26-week average of 50.

Corning (GLW) is recently up 55c to $19.39 on the company sees year-over-year sales, earnings growth in Q4.  November call option implied volatility is at 21, December is at 18, January is at 23; compared to its 26-week average of 24,

VIX methodology for Amazon (VXAZN) is recently down 4.6% to 27.32. cboe.com/VXAZN

Actives at CBOE:  AAPL PBR TSLA AMZN TWTR GILD MRK

Stocks with increasing volume @ CBOE:  CLF AMD MRK IDCC CMCSA NQ MDCO ALR VECO CHRW

CBOE Volatility Index (VIX) is recently down 39c to 15.65; November 23, 24 & 25 calls active on 335K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently down 99c to 31.68

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 22c to 15.89; compared to its 10-day moving average of 20.24. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) is recently up 39c to 261.26 compared to its 50-day moving average of 265.73 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently up 4.78 to 877.02 as investors react to better than expected corporate earnings.

Two SPX Charts To Watch: Fibonacci & V-Shaped Bottom

We recently showed some very long term charts going back to 2009 to get big picture perspective for the broad stock market. But a more apt trend to focus on in the near-term is a bit shorter trend (although it is still fairly long). First is the S&P 500 Index (SPX) (SPY) stripped down, ‘clean’ chart from the November 2012 key low to the recent September 2014 all-time high (which for now is a key high). Beyond that, we’ve also pictured a more indicator-filled chart comparing the recent ‘V’ stock market reversal bottom to the one that occurred in Jan/Feb 2014.

The bigger picture trend chart is first below. Note that the Nov 2012 low is the last time we broke the 200 day simple moving average until we did last week. The first Fibonacci Retracement on this trend is the 1859.75 level, which held extremely well as support on the recent sharp pullback. We’ve now since overtaken the 200 day MA as well.

For now, we’re back into somewhat bullish mode, but with the cavaet that we’re kind of in a ‘no man’s land’ between this 1860/1910 and 2000/2020 range. There is various support and resistance between those areas, but that is really the key SPX range to focus on going forward. A trading range for several weeks/months between that range is possible.

However, given the recent strength of the rebound (and the similarity to the ‘V’ bottom the market had in February 2014), we could also blast right on through to new highs by year-end. That’s the second chart below with Percent R and Band Width Indicator.

On the downside, if we do have further breakdown in this trend — watch the 200 day MA and that first Fibonacci level. Beyond that, the next key Fibo level is 1761.06 — and further down to a total 50% Retracement of 1681.31 (that is around the 1700 level that is also a longer-term Retracement level.

SPX Daily Chart with 200 Day Moving Average & Fibonacci Retracement

MW 10 28 14 fibo-d-retracement

SPX Daily Chart ‘V’ Bottom Comparison

MW 10 28 14 spx-webinar-roi

MW co-Portfolio Manager, Rapid Options Income & ETFTRADR BigTrends.com

Blogging Options: CBOE Morning Update 10.28.14

Earnings season is upon us, and for the most part companies have beat this morning. But the drop in Durable Goods Orders by 1.3%, the revision lower for last month and the miss in the core rate pared stock gains in the futures market.  Bond yields fractionally higher.  Volatility as an asset class:

Twitter (TWTR) is down $6.52 to $41.94 in the premarket after reporting higher than expected Q3 revenue and EBITDA but lower than expected monthly average users and provided weaker than expected Q4 guidance. October weekly call option implied volatility is at 154, November is at 74, December is at 48, January at 47; compared to its 26-week average of 54.

Kohl’s (KSS) is off $3.55 to $55 following less than expected Q3 SSS guidance and fiscal 2014 EPS guidance. October call option implied volatility is at 32, December is at 27, January is at 26; compared to its 26-week average of 25.

Amgen (AMGN) is up $2.81 to $151 in the premarket on strong Q3 results on strong sales. October weekly call option implied volatility is at 48, November is at 29, December is at 23, January is at 23; compared to its 26-week average of 24.

Options expected to be active @ CBOE: TWTR PBR TSLA LVS PFE KSS BWLD FB TSLA V BIDU FCX APC BP CLF

CBOE Crude Oil Volatility Index (OVX) at 32.44, compared to its 50-day moving average of 22.83. WTI Crude oil trades near $81. CBOE.com/OVX

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Options Average Daily Volume This Month – 1.3 Million for SPX and 1 Million for VIX

I recently showed a chart with the yearly growth in volume in options on the CBOE Volatility Index® (VIX®) to a senior executive at a financial services firm, and the executive said that the VIX options volume strong growth in recent years was hard for him to believe, in light of the fact that the VIX Index had been relatively low in recent years. I responded that the VIX options had experienced some high volume days even at times when the VIX was relatively low and not making any big moves, because some investors like to buy VIX calls and VIX futures at times when the VIX is lower than 13; they like to “buy low” and believe the VIX Index is mean-reverting; they believe the index has great potential to go up dramatically but little potential to take a dramatic fall when VIX is below 13.

RECORD VOLUME DAYS THIS MONTH

While some investors prefer to buy VIX calls when the VIX is at relatively low levels, other investors engage in more S&P 500 and VIX options trades at times when the SPX and VIX indexes are moving. The options average daily volume this month (through October 23) is more than 1.3 million for SPX options and 1 million for VIX options.

1111VIX SPX 3 charts Oct 27

This month the closing values of the VIX rose from 14.46 on October 6th, to 29.26 on October 16th.  Trading of options on the S&P 500 Index (SPX) at CBOE set a new single-day volume record on October 15 as 2.6 million contracts traded, surpassing the previous high of 2,282,029 contracts on June 20, 2013.  Also on October 15, trading volume for VIX options was 1,832,732 contracts, a figure that was close to the all-time high. At CBOE Futures Exchange (CFE), trading of VIX futures set consecutive single-day volume records on October 14 and October 15, with 616,906 contracts and 791,638 (estimated) contracts traded, respectively.

INDEX OPTION VOLUME PRIOR TO THIS MONTH More

Positive Momentum, Overhead Resistance & Valuations – Weekly Market Outlook

Last week was the first winning week in the past five, and the bulls more than made up for lost time.  When all was said and done, the S&P 500 (SPX) (SPY) advanced 4.1% last week, putting it back at its pre-meltdown level.  It remains to be seen if stocks are here to stay, and ready to remain in an uptrend – in the short run, they’re very overbought.  But, the pivot from two weeks ago was a decisive one, and there’s still room to run higher.  It’s just a matter of timeframes as to whether or not you’d want to jump in this week.

We’ll weigh the risks and odds in a moment.  First we need to dissect last week’s economic numbers.

Economic Data

It was another important week on the real estate front, with reports of existing home sales, new home sales, and the FHFA housing price index all coming out.  In a nutshell, they were all good.  The pace of existing home sales was ratcheted up to 5.17 million (the strongest rate in a year), while new home sales hit an annualized clip of 467,000, up from August’s reading of 466,000.  The FHFA also reported the price of homes ticked higher from August’s levels, by 0.5%.  Following last week’s modest improvements in housing starts and building permits, we can see with some pretty good confidence that the overall real estate trend remains reasonably positive.

Real Estate Trends ChartPH 102614-real-estate

Source:  FHFA, Census Bureau, Standard & Poor’s, and National Assn. of Realtors

The only missing piece of real estate data we care about is the Case-Shiller Index for August, which is due on Tuesday.  It’s been in an uptrend too, however, and that trend should be extended for August.

Note that inflation remains muted.  As of the end of September, the annualized consumer inflation rate stood at 1.66%, marking the fourth straight month of decline. 

Everything else is on the following grid:   Economic Calendar

PH 102614-econ-data

Source:  Briefing.com

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The Weekly Options News Roundup – 10/25/2014

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.

That’s Billion With a “B”

Amidst last week’s record trading volumes and extreme market volatility, an estimated $90 billion worth of CBOE Volatility Index (VIX) options and futures contracts were traded.

“In Market Storm, A Rush to Trade Volatility Itself” – Michael Santoli, Yahoo Finance

http://yhoo.it/1t8ViAK

“October is Living Up to its Reputation”

October is typically the most volatile month of the year. This year, the numbers tell us it’s been even more volatile than usual.

“So Where Does This October Rank in Terms of Volatility?” – Ryan Detrick, Yahoo Finance Contributor, Tumblr Blog

http://ryandetrick.tumblr.com/post/100798429260/so-where-does-this-october-rank-in-terms-of

“Clarity is Now the World’s Most Elusive Asset”

After last week’s wild ride, where do we go next? Investors aren’t so sure. As Steven M. Sears writes, “clarity is now the world’s most elusive asset.”

“Mr. Market’s Awful Sense of Timing” – Steven M. Sears, Barron’s

http://online.barrons.com/articles/the-stock-markets-awful-sense-of-timing-1413608243?mod=BOL_columnist_latest_col_art

“The Panic has Subsided”

This week’s advances in the S&P 500 caused a sharp decline in the CBOE Volatility Index. In fact, the VIX Index fell more than 10 percent each day for three consecutive days — the first time that’s ever happened — and has dropped more than 30% the last five days.

“Panic Defused in Stocks with Sharpest VIX Drop Since 2009” – Callie Bost and Eric Lam, Bloomberg News

http://www.bloomberg.com/news/2014-10-22/panic-defused-in-stocks-with-sharpest-vix-drop-since-2009.html

“Remembering the Great VIX Panic of Fall 2014” – Adam Warner, Schaeffer’s Investment Research blog

http://www.schaeffersresearch.com/commentary/content/blogs/remembering+the+great+vix+panic+of+fall+2014/trading_floor_blog.aspx?blogid=123112#refresh

VIDEO

Trader James Ramelli of Option Hacker discusses this week’s unprecedented moves in the CBOE Volatility Index — “On The Markets,” Bloomberg TV

http://www.bloomberg.com/video/options-update-how-to-play-pandora-iVrG0LleTRWg~O67CQpzuQ.html

VIDEO

Jamie Tyrrell of Group 1 Trading discusses this week’s drop in the CBOE Volatility Index, October settlement and implied volatility levels on November VIX series – “Volatility Sonar Report,” optionsmonster.com

http://www.optionmonster.com/news/article.php?page=videocast_quiet_returning_to_vix_97991.html

CBOE RMC Europe Report

If you were unable to attend the CBOE Risk Management Conference Europe in September, EQ Derivatives has you covered with their special report from Ireland. Make plans to join us for the next CBOE RMC, which will be held March 4 to 6, 2015, at the Park Hyatt Aviara in Carlsbad, California.

“CBOE Risk Management Conference Europe Report” – EQ Derivatives

http://eqderivatives.com/special-reports

Blogging Options: CBOE Morning Update 10.27.14

Pretty good volume day Friday for options, with 16.85mm contracts traded.  ~913K SPX and over 1 million VIX contracts change hands.  Soft opening on US markets this morning.  Volatility as an asset class

Brazil’s president Rousseff won a second term yesterday, defeating the conservative Aécio Neves in a race that exposed Brazil’s economic and social fault lines.

MSCI Brazil Index (EWZ) is down $3.67 to $37.12 in the premarket. MSCI Brazil Index October weekly call option implied volatility is at 119, November is at 53, December is at 39; compared to its 26-week average of 29.

Petrobras (PBR) is down $2.21 to $10.72. October weekly call option implied volatility is at 174, November is at 118, December is at 79; compared to its 26-week average of 45.

Telefonica Brasil (VIV) is down $1.35 to $17.57 in the premarket. Overall option implied volatility of 31 is above its 26-week average of 25.

Options expected to be active @ CBOE: MRK EWZ PBR BHP NQ GPRO BWLD

CBOE Crude Oil Volatility Index (OVX) at 31.27, compared to its 50-day moving average of 22.55. WTI Crude oil trades near $81. CBOE.com/OVX

CBOE S&P 500 Skew Index (SKEW) at 125.57, compared to its 50-day moving average of 130.85. 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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Next Week in Weeklys – 10/27/2014

It is all about earnings this coming week.  I needed to double check the data on three names so the table below may have a couple of blanks.  As soon as I get into the office on Monday I’ll update the table.

As always the max and min are biggest up and down moves, abs is the average move without taking direction into account and the final column is last quarter’s stock price reaction to earnings.  Unless italicized the numbers are based on the last twelve quarters, when italicized that means the company does not have three years of history and the numbers reflect whatever history is available.

Earnings Corrected

 

The Week in VIX – 10/20 – 10/24

Like many people that make their living focusing on the financial markets I subscribe to @zerohedge on my twitter stream. Some of what comes from this is comical and over the top, but there are some very useful comments as well. Giving credit where credit is due @zerohedge pointed out that VIX was down 12% on Friday October 17, down 15.6% on Monday October 20, and down 13.4% on Tuesday October 21. This marks the only time in history that VIX lost 10% or more in three consecutive trading days.

VIX PA

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The Week in Gold and Oil Volatility – 10/20 – 10/24

The prices of both gold and oil can often move together reacting to global events or current business conditions. Currently the two markets are both on the lower end of their historical price range, but oil is in a different place than gold. What I mean by that is that the price of oil does not appear to have any support level, at least for the moment. The chart below probably explains the situation better than I can in words.

Oil Weekly

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The Week in Nasdaq-100 and Russell 2000 Volatility – 10/20 – 10/24

The Nasdaq-100 (NDX) rebounded in sync with the other broad based indexes last week rising almost 6%. VXN responded with a drop of 22.48%. Despite NDX outperforming the S&P 500 VXN did not drop more than VIX. We are still in the midst of earnings season and with several NDX component stocks yet to report VXN is a little elevated relative to VIX.

VXN Fixed

 

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The Week in VXST – 10/20 – 10/24

The CBOE Short-Term Volatility Index (VXST) was down 38% last week as the stock market had the best week in almost two years. The five day drop from the previous Thursday to this past Thursday was a whopping 47%. I recently taught a class where a student commented that volatility does not seem to drop as quickly as it rises. This student had not heard of VXST.

VXST Fixed

 

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Weekly Market Commentary 10.24.14

The stock market has rocketed back from a sharp selloff last week.  At first, this appeared to be an oversold rally, but now it is picking up steam.  Thus, it appears that it could be another intermediate-term bullish move, if one final thing falls into place: the $SPX chart must clearly turn positive.
LM 10 24 14spx

Meanwhile, equity-only put-call ratios rolled over to buy signals
as of October 20th.  There was heavy put buying during the market’s decline,
and these ratios rose sharply to extremely high levels.

Market breadth had been weak all summer.  Regardless, both
breadth oscillators rolled over to buy signals a few days ago.
Volatility indices spiked up last week and then spiked down again
this week.  This created a powerful $VIX “spike peak” buy signal.

LM 10 24 14vix

 

In summary, the bullish evidence is piling up, but we need the
$SPX chart to confirm it in order to turn intermediate-term bullish.

Blogging Options: CBOE Morning Outlook 10.24.14

Ebola in the US takes over the headlines and gets the attention of investors and traders this morning.  Housing starts to be reported 30 minutes after the opening.  Bond yield drops slightly.  Volatility as an asset class:

Microsoft (MSFT) is up $1.23 to $46.25 in the premarket after Q1 top and bottom line beats estimates. October weekly call option implied volatility is at 67, November at 23, December at 20; compare to its 26-week average of 21.

Amazon.com (AMZN) is down $31.25 to $282.19 after reporting disappointing” Q3 results and outlook. October weekly call option implied volatility is at 171, November is at 43, December is at 33, April is at 29; compared to its 26-week average of 32.

Digital River (DRIV) is up $8.37 to $25.75 in the premarket on the provider of commerce as a service solutions company agrees to be acquired by an investor group led by Siris Capital Group in a transaction valued at $840M. Overall option implied volatility of 60 is above its 26-week average of 37.

Options expected to be active @ CBOE: AMZN F MSFT UPS DRIV BMY CL

CBOE Crude Oil Volatility Index (OVX) at 31.78, compared to its 50-day moving average of 22.28. WTI Crude oil trades above $81. CBOE.com/OVX

CBOE S&P 500 Skew Index (SKEW) at 128.77, compared to its 50-day moving average of 130.99. 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.

CBOE S&P 500 BuyWrite Index (BXM) at 1087.40 compared to its 10-day moving average of 1046.46 cboe.com/BXM

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Trading Markets Has Become a Challenge – Know Your Timeframe

‘The only thing we have to fear is fear itself’ – Franklin D. Roosevelt, 1933 Presidential Inaugural Address.

 If you have a bit of an upset stomach watching the massive ups and downs in this market over the last couple of weeks, well you  are not alone.  I have been keeping a bottle of pepto bismal within reach (only kidding – actually more like three bottles!).  We can see and feel the anxiety with every market open, and it soon becomes a game of chicken to see who can get out the door first.  A far cry from the conditions we have been living with for the past few years, but then when the landscape changes we have to identify and make our move.

Markets move with electrifying speed these day, far more velocity and acceleration than we are used to.  Five percent drops that years ago would have taken a few months to occur are happening within weeks.  The scary nosedives are making us all wonder if this time is the ‘big one’, and naturally we remove ourselves from the situation.  The sidelines are not a bad place to be when you are uncomfortable, especially when one can’t sleep well.  Especially now when it appears volatility is here to stay.

When volatility is low there is much higher confidence that markets won’t whipsaw, but when the boat starts tilting from one side to the next then there is the potential for sea sickness.  As the unknown outcome of recent news events expands we are left to wonder if the end is nigh.  Of course, those betting on that outcome have always lost but that doesn’t mean some won’t be scared out of their pajamas.

The fear we see each day is created by our own internal uncertainties about the outcome of negative situations such as the ebola crisis, the ISIS battle we are fighting, Russia/Ukraine or Israel/Hamas conflicts and the Fed policy (among many other things).  None of these have a clear cut positive resolution on the timeline, so if investors believe it is ‘the end’ due to one (or a few) of these issues why should they be left holding the bag?  It’s time to cut and run!  Markets are still within striking distance of new highs and have tons of room to come down – without even damaging the long term uptrend!

However, we can look at history as our guide and to the charts to see how uncertain outcomes eventually resolve in markets.  Without a doubt the fear of putting money to work fades every time.  But what is your time frame?  Are you trading short term or for the long term?  Volatility creates great investing opportunities in long term when prices drop because the ‘usually’ head back up later – history tells us this.  In the short term the wild movements create some trading chances.

Use the fear and uncertainty to your advantage because these moments are not common – but offer some fantastic opportunity to profit.    Yet we always hear some of the best-timed investors/traders make the most money when crowd fear peaks.  Is now one of those moments?  Which side are you on?

Bob Lang, Senior Market Strategist and trades various option trading newsletter Explosive Options

Blogging Options: CBOE Morning Update 10.23.14

Good earnings reports this morning pushing shares higher, SPY up $1.75 in early trade. . CAT beat, large repurchase in the quarter.  LUV, GM, UAL and Dunkin also beat.  LLY showed revenue beat but earnings missed.  Volatility as an asset class:

Nokia (NOK) is up 68c to $8.61 in the premarket after the telecom-equipment supplier reported net profit $941M compared with a loss in the three months to end-September last year, helped by a large tax gain. Overall option implied volatility of 52 is above its 26-week average of 38.

AT&T (T) is down 50c $34 after lowering its revenue outlook on lower than expected new customer signups. October weekly call option implied volatility is at 35, November is at 16, January is at 14; compared to its 26-week average of 15.

Yelp (YELP) is off $8.22 to $62.01 in the premarket after the business review website company reported weaker than expected active local business accounts in Q3. October weekly call option implied volatility is at 175, November is at 64, December is at 53, January is at 49, February is at 52; compared to its 26-week average of 55.

Options expected to be active @ CBOE: T YELP LLY PBR EWZ MSFT P GM LUV CMCSA CAT JBLU MMM UAL

CBOE Crude Oil Volatility Index (OVX) at 30.68, compared to its 50-day moving average of 21.99. WTI Crude oil trades below $81. CBOE.com/OVX

CBOE S&P 500 Skew Index (SKEW) at 127.04, compared to its 50-day moving average of 130.95. 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.

CBOE S&P 500 BuyWrite Index (BXM) at 1056.19 compared to its 10-day moving average of 1046.90 cboe.com/BXM

CBOE DJIA BuyWrite Index (BXD) at 258.32 compared to its 50-day moving average of 266.27 cboe.com/micro/bxd/

‏CBOE Nasdaq-100 Volatility Index (VXN) at 19.95; compared to its 50-day moving average of 16.38.

CBOE 3-Month Volatility Index (VXV) at 17.64, compared to its 50-day moving average of 16.13 cboe.com/VXV

CBOE S&P 500 Short-Term Volatility Index (VXST) at 18.36, compared to its 10-day moving average of 23.50. VXST is a market-based gauge of expectations of 9-day stks.co/r0CS2

Velocity Share VIX Short Term ETN (VIIX) at 48.12; above 50-day moving average of 41.04.
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Calculating the New VIX—the Easy Part

The movements of the CBOE’s VIX® are often confusing.  It usually moves the opposite direction of the S&P 500 but not always.  On Fridays the VIX tends to sag and on Mondays it often climbs because S&P 500 (SPX) option traders are adjusting prices to mitigate value distortions caused by the weekend.

In addition to these market driven eccentricities the actual calculation of the VIX has some quirks too.  The VIX is calculated using SPX options that have a “use by” date.   Every week a series of SPX options expire.  This schedule of expirations forces a weekly shift in the VIX calculation to longer dated options.  For many years the CBOE’s VIX calculations only used monthly SPX options, but starting October 6th, 2014 it switched to using SPX weekly options when appropriate.  See “Why the Switch” section towards the bottom of this post for more information.

The VIX provides a 30 day expectation of volatility, but the volatility estimate from SPX options changes in duration every day.  For example, on October 13, 2014 the SPX options expiring on the 7th of November provide a 25 day estimate of volatility, while the November 14th options provide a 32 day estimate.  In this case to get a 30 day expectation the VIX calculation uses a weighted average of the volatility estimates from these two sets of November options.

The newly updated S&P 500 VIX calculation is documented in this white paper.  It computes a composite volatility of each series of SPX options by combining the prices of a large number of puts and calls.  The CBOE updates these intermediate calculations using the ticker VIN for the nearer month of SPX options and VIF for the further away options.  The “N” in VIN stands for “Near” and the “F” in VIF stands for “Far”.  These indexes are available online under the following tickers:

  • Yahoo Finance as ^VIN, ^VIF
  • Schwab $VIN, $VIF; historical data available
  • Google Finance INDEXCBOE:VIN, INDEXCBOE:VIN; historical data available
  • Fidelity:  .VIN, .VIF;  limited historical data

The final VIX value is determined using the VIN and VIF values in a 30 day weighted average calculation.  Graphically this calculation looks like the chart below most of the time:

Vance new VIX 1

As shown above the VIX value for October 13th is determined by averaging between the November 7th SPX options (VIN) and the November 14th SPX options (VIF) to give the projected 30 day value.  If you look closely you can see that the interpolation algorithm used between VIN and VIF does not give a straight line result; I provide calculation details later in “The Weighted Average Calculation” section

The chart below shows the special case when the VIX is very close, or identical to the VIF value.

Vance 2 VIX

Wednesdays are important days for the VIX calculation:

  • The VIX calculation is dominated by the VIF values.
  • The SPX options used switch such that the old VIF becomes VIN and the options with 36 days to expiration become VIF.
  • Once a month on a Wednesday VIX futures and options expire (expiration calendar).  Soon after market open a special opening quotation of VIX called SOQ is generated.  Its ticker is VRO and it’s used as the settlement value for the futures and options.  Unlike the VIX’s normal calculation, the SOQ uses actual trade values of the underlying SPX options not the mid-price between the bid and ask.  Only one series of options, the ones with exactly 30 days to expiration are used.

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Russell Investments Small Cap Compendium

Russell Investments just released the inaugural edition Small Cap Compendium which going forward will be a quarterly publication. The Small Cap Compendium brings together a variety of market participants that focus on the small cap sector. I was honored to be asked to contribute to this first edition with a discussion of the CBOE Russell 2000 Volatility Index (RVX). The first edition also includes articles from Stephen Wood and Scott Maidel of Russell Investments along with Lori Calvasina of Credit Suisse.

Click the link below to visit the Russell Investments site and download a copy of the Small Cap Compendium –

Russell Small Cap Compendium

Blogging Options: CBOE Mid-Morning Update 10.22.14

Economic reports at the opening not helping stocks move one way or the other. SPY of $0.40.   Volatility as an asset class

Yahoo (YHOO) is up $2.32 to $42.509 after reporting Q3 EPS 52c, compared to consensus 30c. October weekly call option implied volatility is at 69, November is at 42, December is at 37, January is at 35; compared to its 26-week average of 35.

EMC (EMC) is up fractionally to $2.20 in the premarket on Q3 revenue rising 8.3%. October weekly call option implied volatility is at 52, November is at 29, December is at 26, January is at 25; compared to its 26-week average of 21.

Broadcom (BRCM) is up $2.77 to $40.20 after the chip company on a Q3 profit and seeing Q4 revenue in line with estimates. October weekly call option implied volatility is at 65, November is at 28, December is at 27, January is at 25; compared to its 26-week average of 27.

Options expected to be active @ CBOE: YHOO ISRG BRCM CREE VMW PII PBR EWZ OCN LL SIX YELP DDD IRBT TKMR ANGI

CBOE Equity Options Volume; 1,360,425 calls, 821,370 puts, 2,181,795 total

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CBOE Mid-Day Update 10.21.14

Volatility as an asset class

Coca-Cola (KO) is recently down $2.53 to $40.76 following earnings that were in line with expectations, but guidance that disappointed. October weekly call option implied volatility is at 27, November is at 16, January is at 14; compared to its 26-week average of 17.

Harley-Davidson (HOG) is recently up $3.59 to $61.59 after the company reported better than expected Q3 earnings per share. November call option implied volatility is at 27, December is at 24, January is at 23, February is at 24; compared to its 26-week average of 22.

United Technologies (UTX) is recently up $1.72 to $103.21 after UTC Chairman and CEO Louis Chenevert said, “With double-digit earnings and 4% organic sales growth through the first three quarters, UTC remains on track to deliver on our expectations for the year. Our solid backlog and organic growth trends continue to give us confidence in our earnings per share range of $6.75 to $6.85, on sales of about $65B.” November call option implied volatility is at 18, December is at 17, January is at 16, February is at 17; compared to its 26-week average of 17.

VIX methodology for Apple (VXAPL) -20.6% to 23.56, below its 10-day moving average of 30.78. cboe.com/VXAPL

Actives at CBOE:  AAPL PBR KO C GILD DOW EBAY TWTR SHLD NFLX TSLA

Stocks with increasing volume @ CBOE: High option volume stocks: NQ JCP IP DAL CSCO CMG

CBOE Volatility Index (VIX) is recently down $2.05 to 16.52; Oct 16, 17, 18 & 20 calls active on 654K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently down 2.18 to 33.42

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 1.88 to 17.57; compared to its 10-day moving average of 23.24. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) at 259.23 compared to its 50-day moving average of 266.40 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently up 11.60 to 859.28 as earnings season is producing better than expected earnings.

Blogging Options: CBOE Morning Update 10.21.14

Several earnings reports at the opening.  MCD is off $0.75 after missing, VZ lower by $0.50, KO down $2.00.  Oil & Gold higher.  US markets open slightly higher.  Ed Tilly welcomed students from Drake School in Chicago to the SPX yesterday after the close.  CBOE is involved in a tutoring program with volunteers from the trading floor, employees and member firms for Drake students.  This is the 16th year of the program.  Volatility as an asset class:

Apple (AAPL) is up $1.94 to $101.70 on better than expected Q4 earnings and revenue. October weekly call option implied volatility is at 52, November is at 28, December is at 25, January is at 24; compared to its 26-week average of 25.

ARM Holdings (ARMH) is down $2.55 to $39.81 after the microchip designer reported a 34% increase in Q3 profit. November call option implied volatility is at 45, January is at 38; compared to its 26-week average of 34.

Chipotle Mexican Grill (CMG) is down $33 to $620 on better than expected Q3 results and a cautious outlook. October weekly call option implied volatility is at 97, November is at 43, December is at 34; compared to its 26-week average of 29.

Options expected to be active @ CBOE: KO AAPL YHOO ARMH CMG UTX TOT PBR TRV

CBOE S&P 500 95-110 Collar Index (CLL) at 640/20: www.cboe.com/CLL

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VXEWZ Index at All-time High of 72.83 As Brazilian Election Nears

Today’s closing price was an all-time daily closing high of 72.83 for the CBOE Brazil ETF Volatility Index (VXEWZ), which reflects the implied volatility of the EWZ ETF.

222VXEWZ & VXEEM Oct 19

Futures and options on the VXEWZ Index provide investors with tools to manage exposure to Brazil, the EWZ ETF, and related volatility.

A story today at wsj.com provided these comments about the upcoming election in Brazil –

“President Dilma Rousseff of the leftist Workers Party, or PT, is the preferred candidate of millions of Brazilians who’ve been lifted from poverty thanks to the PT’s social programs.  Challenging the incumbent is Aécio Neves, whose Brazilian Social Democracy Party in the 1990s killed hyperinflation and privatized large swaths of the economy. Mr. Neves has pledged to use more austere economic policies to tame Brazil’s sticky inflation and jump-start growth after the nation fell into recession this year. The two are basically tied in the polls just six days ahead of the Oct. 26 vote … “

A story at ETFtrends.com noted that –

“ ‘Weakening foreign demand and a severe, double-digit contraction of business fixed investment may have plunged the Brazilian economy into a technical recession,’ said S&P Capital IQ in a recent research note. The inflation dimension of Brazil’s economic troubles remains particularly thorny …”

333EWZ

For more information on managing volatility and the 26 volatility indexes at CBOE, please visit www.cboe.com/volatility.

CBOE Mid-Day Update 10.20.14

Volatility as an asset class

IBM (IBM) is recently down $12.25 to $169.80 after reporting a 4% decrease in quarterly revenue and no longer expects ‘at least’ $20 operating EPS in 2015. October weekly call option implied volatility is at 31, November is at 20, January is at 19; compared to its 26-week average of 19.

Halliburton (HAL) is recently up 31c to $52.89 after reporting better than expected Q3 earnings. October weekly call option implied volatility is at 57, November is at 43, January is at 34; compared to its 26-week average of 27.

NewLink (NLNK) is recently up $5.59 to $34.94 after announcing a worldwide license agreement for NLG919 development. November call option implied volatility is at 113, December is at 141, January is at 178; compared to its 26-week average of 104.

Actives at CBOE:  AAPL PBR TWTR SHLD NFLX TSLA

Stocks with increasing volume @ CBOE: High option volume stocks: AA KO SUNE BBRY IBM HLF PBR CMG AA BP BBRY NCR DNKN

CBOE Volatility Index (VIX) is recently down $2.55 to 19.44; Oct 20, 21, 22 & 25 calls active on 524K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently down 2.01 to 36.57

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 2.79 to 21.02; compared to its 10-day moving average of 23.33. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) at 257.29 compared to its 50-day moving average of 266.51 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently up 2.74 to 843.66 as IBM hits a 52

Will The Bounce Have Legs? – Weekly Market Outlook

Although the market technically lost ground last week, between Wednesday’s and Thursday’s back-to-back intraday reversal bars and Friday’s strong bullish follow-through, stocks ended the week on such a positive note that it’s tough not to be at least a little bullish now.  And, given that all big trends start out as small ones, Friday’s bullish seed may well be the beginning of a ‘normal’ year-end rally.

There are still a couple of potential tripwires in front of us, but traders may already be preparing a way around or over them — until they reach potential overhead resistance.  We’ll discuss those potential pitfalls in a moment, after a look at last week’s and this week’s major economic news.

Economic Data

Last week’s economic dance-card was plenty full last week, though three data sets are clearly more important than the rest… retail sales, industrial productivity (and capacity utilization), and housing starts (with building permits).  We’ll focus our discussion to just those three items, beginning with September’s retail sales released on Wednesday.

Although the retail sales numbers given to us by the Department of Commerce were negative, it’s important to understand that the results are a comparison to August’s levels; there may well be a calendar-based reason for the slight dip that shouldn’t be a concern.  In any case, retail sales fell by 0.3% last month, and when taking automobiles out of the calculation, they still fell by 0.2%. The broad trend of US retail sales is still pointed in an upward direction…. firmly.

On Thursday the Federal Reserve gave us its measure of industrial activity.  Production was up 1.0% last month, and technically speaking has never been stronger.  Meanwhile, utilization of the nation’s industrial output capacity stands at 79.3%.  That’s tied for as high as it’s been in years.  Both trends bode well for the long-term market — we’ve discussed previously that there is a correlation between these two economic measures and the stock market.

Last but not least, the pace of housing starts and building permits grew respectably last month.  The pace of new starts jumped to 1.017 million, while building permits were issued at a pace of 1.018 million in September.  Both pieces of data continue to show modest progress for the real estate and construction market.

Housing Starts and Building Permits Chart

PH 101914-starts-permits

Source:  Thomson Reuters Eikon

Everything else is on the following grid.  Notice we’ll get a great deal more real estate data this week to round out last week’s information.

Economic CalendarPH 101914-econ-data

Source:  Briefing.com

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Blogging Options: CBOE Morning Update 10.20.14

Asian shares looked to lead US markets higher this morning, until disappointing guidance from Big Blue this morning (and earnings of $3.68 versus consensus estimates of ~$4.25). European shares retreated ~1% (unsure of RTGS system being down is connected to the selloff), US futures gave up early gains.  HAL beat and raised it’s dividend.  20K VIX Futures trade in early session, after 328K trade in Friday session.  Watch VIX. Volatility as an asset class:

IBM (IBM) is down $12.24 to $169.81 in the premarket, as it no longer expects ‘at least’ $20 operating EPS in 2015. October weekly call option implied volatility is at 38, November is at 27, January is at 22; compared to its 26-week average of 19.

(SAP) is off $2.60 to $66.38 after the software provider lowered its earnings outlook for this year.  Overall option implied volatility of 25 is above its 26-week average of 20.

Hasbro (HAS) is down $0.10 to $53.75 on light volume, after reporting Q3 adjusted EPS $1.46, consensus $1.45. November call option implied volatility is at 28, January is at 22, April is at 20; compared to its 26-week average of 20.

VIX methodology for IBM (VXIBM) @ 25.76, compared to its 50-day MA of 19.14. cboe.com/VXIBM

Options expected to be active @ CBOE: IBM YHOO ARMH HAL HAS BTU CMG

CBOE S&P 500 95-110 Collar Index (CLL) at 637.95: www.cboe.com/CLL

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Next Week in Weeklys – October 20, 2014

As always I’ll start with the additions and deletions to the Weeklys program. Actavis PLC (ACT) which is a specialty pharmaceutical company was added to the list this past week. Now on to the good stuff…

There are well over 50 companies on the Weeklys list reporting earnings next week. As a reminder, max is the biggest up move and min is the biggest down move for th stock in reaction to earnings.  Abs Avg represents the average price move (up or down) in reaction to earnings and Last Q is what the stock did for the previous quarter.  All data is for the last 12 quarters unless the line is italicized (P, AAL, and YELP).

I think the length of the list below speaks for itself with respect to next week’s earnings calendar –

Untitled

The Week in VIX – 10/13 – 10/17

At the worst point last week the S&P 500 was down 9.5% from the closing high of 2011.36 on September 18th and down about 4.5% from last Friday’s close. By Friday we came back to less frightening levels and closed the week down 6.2% from the all time closing high and down 1% on the week. For those that count a correction as a 10% move, we didn’t have one. The guys in the SPX and VIX pit may have a different opinion of how the price action felt. All kinds of volume records were tested or beaten and VIX climbed to levels not experienced since December 2011.

VIX PA  More

The Week in Gold and Oil Volatility – 10/13 – 10/17

Commodity related implied volatility tends to react to a break of support or resistance through an upside move. Often implied volatility will drop when a commodity is stuck in a range or a test of support or resistance holds. We actually have a case of both going on right now. I’ll start with support holding in the Gold market.

Before the equity markets took over the headlines there was a lot of buzz about gold which was testing lows put in late last year. GVZ moved up as there was some concern a breakdown in price, but the support level has held for the mean time.   The illustrations are below with a weekly GLD chart along with last week’s GVZ action.

Gold Chart

I did want to note the spike on Wednesday – that was when the stock market was really experiencing a scary day, the result was a rise in volatility across all markets that didn’t last for too long.

GVZ PA

The oil market has been making headlines as the price of oil has been hitting low prices not seen in years. This drop in the price of oil pushed the CBOE Oil ETF Volatility Index (OVX) to levels not seen since April of 2013. Again, here’s a weekly chart, but this time of the United States Oil ETF (USO), showing a break of support and then a chart showing how elevated OVX was for the past week.

Oil Weekly 10172014

OVX was already over 30 as of last Friday and spent the whole week in the 30’s based on the break of support along with some big swings in the price of oil.

OVX PA

The volatility term structure curves always tell a more complete and longer term story. I’ll repeat something I say often about following the volatility markets – if you are not looking at the term structure in addition to the spot index you are not seeing the big picture. The big picture for Gold, based on a flat curve is that the jury is still out on this support level holding. A return to contango could be taken as an endorsement of the support line around 114.50 being solid support that is expected to hold. The OVX term structure is in backwardation which can be interpreted as the market expecting oil volatility to come down in time which would mean the price of oil stabilizing at some time and developing a new range.

GVZ OVX CURVE

The Week in Emerging Market Volatility – 10/13 – 10/17

Both EEM and EWZ moved higher last week, despite the drop in the S&P 500. Also, the respective volatility indexes moved up based on an increase in global equity risk perceptions. I’ll start here with the duller of the two and talk about VXEEM.

EEM rose just over .5% and VXEEM was up over 10% for the week. On Wednesday, when the world appeared to be coming to an end, VXEEM finished the day at 31.90 for the first closing price in the 30’s since December of last year.

VXEEM FIXED

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The Week in VXST – 10/13 – 10/17

The CBOE Short-Term Volatility Index was introduced less than a year ago and since then there have not really been any headline grabbing moves in the volatility space. That was until last week where the high range for VXST stretched from close to 20 up to almost 40. The closing VXST level on Wednesday was the first close over 30 since early December 2011.

VXST PA

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The Week in Nasdaq-100 and Russell 2000 Volatility – 10/13 – 10/17

The CBOE Russell 2000 Volatility Index (RVX) climbed over 30.00 during the day Thursday for the first time since June 2012. For the week RVX finished at 25.48, up 4.64% while the underlying market was up 2.75% for the week. Yes you read that right, the Russell 2000 was up 2.75% last week which was a week where it didn’t feel like such a thing was possible.

RVX PA

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The Week in Volatility Indexes and ETPs – 10/13 – 10/17

I hate being a broken record in this space, but the week over week changes do not do any justice to what was last week in the equity and volatility markets. I threw the closing curve from Wednesday in the mix below when VXST closed at the highest level since December 2011.  On Monday VVIX was also at much higher levels closing over 130 for the first time since August 2011 when VIX got all the way up to 48.00 based on a 6.66% drop in the S&P 500.

VXST VIX VXV VXMT

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VXEWZ Closes at 70.03 As Brazil Volatility Rises

At the close of a busy week, the CBOE Brazil ETF Volatility Index (VXEWZ) rose to a closing value of 70.03 today (Friday).

A recent story from Reuters noted that –
Brazil expects to see greater volatility in its economy when the United States begins hiking interest rates, Brazilian central bank chief Alexandre Tombini said on SaturdayBrazil has been preparing for an eventual rise in U.S. rates by amassing around $380 billion in currency reserves and maintaining a floating currency, Tombini said on the sidelines of the International Monetary Fund and World Bank fall meetings in Washington.”Note the recent price action for the VXEWZ and VXST indices in the charts below. Futures and options are available on the VXEWZ, VXST, VIX, and 5 other volatility indexes at CBOE www.cboe.com/volatility.

VXEWZ Oct 17 VXST Oct 17

The Weekly Options News Roundup – 10/17/2014

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.

VIX Index Soaring
October is embracing its reputation as the most volatile month on the calendar with the VIX Index reaching levels not seen in several years.

“Doubt Volatility Is Here to Stay? Just Look at the VIX”- Saumya Vaishampayan, WSJ Money Beat
http://on.wsj.com/1ubyprE

“‘Fear Gauge’ Hits New Highs as Dow Jones Industrial Average Plummets” – Andrea Kramer, Schaeffer’s Investment Research
http://bit.ly/1waS3GG

“CBOE Volatility Index Shows Fears in Financial Markets Highest Since 2012” – Josie Cox, The Wall Street Journal
http://on.wsj.com/1xOzysJ

“The VIX is at a critical level”- Amanda Diaz, Yahoo – CNBC Video
http://yhoo.it/1vZQzA0

“Volatility Trade Obsesses Market as VIX Note Does $6.5B” – Inyoung Hwang and Sofia Horta e Costa, Bloomberg
http://bloom.bg/1vDVKYH

Trading Volumes Surging
The recent uptick in volatility has caused a surge in options trading activity.  CBOE has experienced seven consecutive days of over seven million contracts traded, including 10.6 million contracts traded on Wednesday, just shy of the all-time record

“U.S. Options Volume at Highest Since 2011 as Volatility Soars” – Saqib Iqbal Ahmed, Reuters
http://reut.rs/ZGrMFH

“Why the Stock Market’s Scary Ride is a Win for Chicago Exchanges” – Lynne Marek, Crain’s Chicago Business
http://bit.ly/ZGaGHY

“U.S. Listed Options Volume Surges on Apple iPhone 6 Launch, Alibaba IPO and Return of Volatility” – Andy Nybo, Tabb Forum
http://bit.ly/1xSgSIK

“CBOE Holdings’ Exchanges Set Several Trading Records on October 15” – CBOE.com
Jlne.ws/1sWMGx9

More Volatility on the Horizon? 
Is the long run of low volatility coming to an end?  The options market has been bracing for more volatility.  Investors can do the same.

“U.S. Options Market Set for More Downside in Stocks”- Saqib Iqbal Ahmed, Reuters
http://reut.rs/1vdgjcT

“The Next Market Crash: How to Prepare for It” – Steven M. Sears, Barron’s
http://on.barrons.com/1qIzx4X

Fox Business Video
“What’s behind the latest spike in market volatility?” – Michael Palmer and Todd Horwitz,
http://bit.ly/104f58l

 

Weekly Market Commentary 10.17.14

Stocks have had a rocky week, but some buy signals are beginning to appear.

$SPX broke down through support at 1925 this week, and immediately plunged to 1820,
which is also the area of the April lows. That is support for now.  If that should give
way, then the February lows at 1740 would be the next support area.  As for resistance,
there is plenty of overhead resistance from 1925 all the way up to 1960 and beyond.

LM 10 16 spx

Equity-only put-call ratios are racing higher every day.  Thus,
they remain on sell signals, although at their current heights, one
would have to consider them to be in oversold territory.

Market breadth has been surprising.  “Stocks only” breadth has been positive for the last
three days, including the huge down day on Wednesday.  Even so, breadth oscillators are
still on sell signals, although they are finally approaching buy signals.

Volatility indices finally exploded to the upside.  This is long
overdue, and frankly I think $VIX should be higher than it is.
The trend of $VIX remains higher, though, and that is intermediate-term
bearish for stocks.
LM 10 16 14 vix

In summary, the bulls have been wounded, but the massive oversold conditions
that were created are now generating some buy signals.  These can be powerful
buy signals, but as long as the intermediate-term indicators remain on sell signals,
the intermediate-term outlook remains bearish.

CBOE Mid-Day Update 10.17.14

Volatility as an asset class

Honeywell (HON) is recently up $3.39 to $89.77 on solid Q3 results and raising FY14 EPS guidance. November call option implied volatility is at 20, December and January is at 19, March is at 20; compared to its 26-week average of 18.

Morgan Stanley (MS) is recently up 83c to $33.36 after reporting better than expected Q3 revenue of $8.9B, compared to consensus $8.17B. October weekly call option implied volatility is at 30, November is at 30, December and January is at 25; compared to its 26-week average of 24.

Textron (TXT) is recently up $4.63 to 38.35 on a better than expected Q3 and outlook. November call option implied volatility is at 32, December is at 30, January is 27, March is at 28; compared to its 26-week average of 27.

Actives at CBOE:  AAPL PBR TWTR TSLA NFLX AMZN FB BAC TSLA CLF C DAL CMCSA AMZN

Stocks with increasing volume @ CBOE: High option volume stocks: COV IBM SOHU WPZ THOR FCG CECO

CBOE Volatility Index (VIX) is recently down $4.47 to 20.74; Oct 20, 25, 27 & 30 calls active on 366K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently down 2.87 to 37.46.

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 7.16 to 23.32; compared to its 10-day moving average of 22.71. stks.co/r0CS2

S&P 100 Options (OEX) recently is recently up 13.28 to 843.06 as stocks rally on better than expected corporate earnings.

Blogging Options: CBOE Morning Update 10.17.14

US Futures look to open higher, extending yesterday’s afternoon rally.  Asian shares lower overnight, with NIKKEI off 1.4%.  European shares up ~1% to 2%.  Yields rising on US Treasuries as investors calm down. Oil futures higher.  URBN off $4.50 to ~$30 on margin drop,  Big volume at CBOE yesterday. Volatility as an asset class:

Google (GOOG) was down over $4.50 in the premarket but has rallied back to unchanged, after the Internet giant’s Q3 earnings missed forecasts as it increased spending. October call option implied volatility is at 147, November is at 46, December is at 33, March is at 31; compared to its 26-week average of 23.

SanDisk (SNDK) is off $1.00 to $84.31.  October volatility elevated into Q3 and guidance Q4 guidance missed expectations, because the company is seeing more demand than it can fully supply. October call option implied volatility is at 98, November is at 44, January is at 35; compared to its 26-week average of 32.

General Electric (GE) is up 75c to $25 in the on better than expected Q3 results at industrial segment. October call option implied volatility is at 35, November is at 23, December is at 21, January is at 19; compared to its 26-week average of 17.

Options expected to be active @ CBOE: GOOG GOOGL GE HON SNDK COF SLB MS

CBOE S&P 500 95-110 Collar Index (CLL) at 635.90: www.cboe.com/CLL

CBOE Crude Oil Volatility Index (OVX) at 34.07, compared to its 50-day moving average of 21.08. WTI Crude oil trades near $83. CBOE.com/OVX

CBOE S&P 500 Skew Index (SKEW) at 127.97, compared to its 50-day moving average of 130.64. 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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A Handful of Timely Volatility Trades

VIX is much higher than it was early last week.  So are VXX and RVX.  Also, the S&P 500 and SVXY are both lower.  Anyone can tell you that, so I decided to do some digging and find some timely trades from last Tuesday and Wednesday (or beyond) when the idea of VIX in the 30’s was something that even a permabear would not have imagined.

First I want to highlight a trade I noticed just under a month ago (specifically September 19th) in the CBOE Russell 2000 Volatility Index option space.  Someone came in and bought RVX Oct 29 Calls for 0.25 and as RVX moved up a little that day they also purchased the RVX Oct 30 Calls for 0.25.  The 29’s traded at 1.25 today and the 30’s were bid at 0.75.

Poor old VXX is always getting flack for not providing good long volatility exposure.  When I defend VXX, I say think about owning it like owning a long out of the money call on volatility.  When you own an out of the money call you often lose money when the underlying market moves up just a little.  You definitely lose money when the underlying market is flat or moves lower.  I just described the price behavior of VXX and it has reacted with quite an upside move over the past few days.

Well the underlying for VXX (October and November VIX futures contracts) are up dramatically over the past few days and VXX is up about 25% since last Tuesday (October 7th) closing today at 40.33.  When VXX was trading at 31.13 there was a buyer of VXX Oct 30 Calls at 1.99 that also sold VXX Oct 40 Calls for 0.21 and a net cost of 1.78.  If this trade is held through the close on Friday and VXX finishes the day over 40.00 the net result is a profit of 8.28.

On last Wednesday (Oct 8th) there was a very boring (but profitable) trade executed in VIX options.  There was a buyer of a good number of the VIX Oct 18 Calls for 1.25.  October VIX settlement is not until next Wednesday October 22nd.  I would think a buyer of those VIX Calls would have taken at least a partial profit by now.  There are also several call spreads that were purchased early last week that have increased dramatically in value in about a week and a half of trading.

SVXY is more or less the opposite of VXX.  It takes an inverse position in VIX futures relative to the long position represented by VXX.  The result is a grind higher for SVXY when VXX grinds lower.  It also means that SVXY will drop when VXX rallies and that is exactly what has happened.  SVXY finished today at 53.26.  Last Tuesday when SVXY was at 74.39 someone bought SVXY Oct 24th 68 Puts at 2.10 and sold SVXY Oct 24th 66 Puts for 1.70 and a net cost of 0.40.  If SVXY is under 66 next Friday and if the trade has not been exited early the result will be a profit of 1.60.

I could go on all night, but there are other duties calling me.  I’m looking forward to taking a closer look at all the different ways to get volatility exposure and how those markets acted this past week over the weekend.

Weekly Weekly’s Option Report 10/16/14


Traders are loving the wild rides in the market.

I’m Angela Miles covering Weekly’s options expiring next Friday, 10/24.  I’m starting with SPX this week, because in my last weeklys report, there was notable downside put buying around the 1875 strike. Wow, did those traders play it spot on as the S&P 500 plunged!  In weekly options expiring next Friday in SPX there is decent volume building in put contracts including the 1,750, 1,775 and 1,825 strikes. Although there are some traders positioning on the upside with 1,900 and 1,910 out-of-the money calls.

Earnings are motivating action in the Weekly’s, especially with big Apple reporting Monday. As AAPL trades around $96 dollars traders are coming for calls ahead of next week’s options expiration. The 103 call strike is the most popular so far on the call side. But, there are also positions on the put side at 93, 94 and 95 strikes as traders prepare for a possible slide in Apple shares after earnings are announced. The straddle (the simultaneous purchase of a put and  a call) suggests around a 5%  move up or down off Apple’s earnings.

Another big name reporting earnings on Monday: Chipotle. The weekly straddle at the 640 strike prices in at $52. That’s around an 8% move which is higher than the 6% the straddle predicted ahead of previous earnings from CMG.

Tuesday, Coca-Cola (KO) turns in results. Going into Coke’s earnings news the 42 puts strike is getting action as KO trades $42. There are 2,600  of the 42 puts contracts on the tape, which could be derived as sign of conviction.

Yahoo (YHOO) also reports earnings next week.  The stock is trading around  $37 and there are calls and puts in play. Call options contracts are generating interest in the 38, 40 and 42 lines. On the put side, it’s 34 and 35 strikes. Both of those plays in the calls and the puts could be spreads traders are putting on ahead of earnings. The overall bias however, is on the call side.

Verizon (VZ) is also set to report next week. The stock is trading around a 5-month low. That appears to be motivation for upside call buyers at the 47 and 48 strikes.

Taking a look at  a stock that likely to get busy next week off earnings this week: Netflix. The video streaming company revealed weakness in its subscriber numbers and it’s causing trouble for the stock as NFLX trades down $105 dollars, two hours into the trading day, on heavy options volume of 68,000 contracts out of the gate this morning. Going into earnings. puts were heavy and traders on my “In The Money” show might have been preparing for major move.  So what’s next? Well, as Netflix is trading around $343 dollars call buyers are stepping up by purchasing call strikes all the way up to 370 into next week’s options expiration.  That’s an indication some traders are looking for a bounce.

One name has been added to the list of Weeklys: Actavis.

That’s it for now.  Thank you for watching and I hope you will join me on Twitter @AngieMiles

SPX Downside Targets 10% To 20% Lower Come In Focus If Weakness Continues

Big Picture View Shows SPX Support Around 1700 & 1550/1500
If the market continues lower, some clear downside targets come into view using a stripped down long-term chart of the S&P 500 Index (SPX) (SPY).  A Monthly Chart of SPX with a Fibonacci Retracement from the March 2009 infamous ‘666’ low to the recent September 2014 all-time high is below.  I posted a similar chart to this a couple weeks ago, this is an even more stripped down version with a longer history to look at — and it remains relevant in the current environment.
SPX Monthly Chart with Fibonacci Retracement
spx-m-101514
1700.08 (round off to 1700 as round levels are often important from a technical, sentiment, and psychological perspective) is the first Fibonacci Retracement level, 23.60%.  That is around 9.4% lower from Wednesday’s close.
Below that, there is the “double top” around SPX 1550 that formed with significant highs reached in 2000 and 2007 — also the next Fibonacci Retracement level is around the 1500 level.  That area is around 17% to 20% down from recent closes.
Times like this are a good time to look at the big picture of where we’ve gone (and where we could come back down to) — and the market could certainly avoid further pullbacks that would take it to these targets (we’ve just now crossed below the simple 200 day Moving Average on the SPX — a volatile choppy consolidation around here followed by a resumption of upside is another possible scenario in my analysis).
Moby Waller co-Portfolio Manager, Rapid Options Income & ETFTRADR  BigTrends.com

 

RVX Index Up 58% — Which RVX Futures and Options Strategies to Consider?

In the time period from August 22 through October 15 –

  • The Russell 2000® (RUT) Index fell from 1160.34 to 1072.45 (a 6% drop)
  • The CBOE Russell 2000 Volatility IndexSM (RVXSM) rose from 16.13 to 25.49 (a 58% jump).

RVX RUT Oct 15

The RVX Index is a leading barometer of investor sentiment and market volatility relating to the Russell 2000 Index and small-cap stocks, and is a key measure of market expectations of near-term volatility conveyed by Russell 2000 stock index option prices. It measures the market’s expectation of 30-day volatility implicit in the prices of near-term Russell 2000 options.

SAMPLE STRATEGIES – RVX FUTURES AND OPTIONS

Investors who are bullish on RVX, and bearish on small-cap stocks consider the following strategies (but please note that the RVX and RUT indexes do not always move in the opposite directions) –

  • Long RVX Call Options
  • Long RVX Call Spreads
  • Short RVX Put Credit Spreads
  • Long RVX Futures

Investors who are bearish on RVX, and bullish on small-cap stocks could consider—

  • Long RVX Put Options
  • Long RVX Put Spreads
  • Short RVX Call Credit Spreads
  • Short RVX Futures

To learn more about the futures and options on the RVX Index and on risk management strategies, please visit www.cboe.com/RVX.

CBOE Mid-Day Update 10.16.14

Volatility as an asset class

Chesapeake Energy (CHK) is recently up $2.80 to $20.61 after the energy company announced that it sold Marcellus and Utica shale assets to Southwestern Energy (SWN) for $5.375B.

October weekly call option implied volatility is at 65, November is at 51, December is at 48; compared to its 26-week average of 32.

Energy Select Sector SPDR (XLE) is recently up 47c to $81.03 as WTI oil trades near four-year lows. October call option implied volatility is at 38, October weekly is at 45, November is at 30, December is at 29; compared to its 26-week average of 15.

eBay (EBAY) is recently down $2.39 to $47.31 after reporting roughly in-line Q3 results but cut its FY14 guidance. October call option implied volatility is at 34, November is at 30, January is at 29; compared to its 26-week average of 27.

Actives at CBOE:  AAPL PBR TWTR TSLA NFLX AMZN FB BAC TSLA C HPQ AMZN

Stocks with increasing volume @ CBOE: High option volume stocks: HBAN YGE PFF NVAX ASH TSM ZOES MYCC NMM TTPH

CBOE Volatility Index (VIX) is recently down 3c to 26.24; Oct 22, 24, 25 & 29 calls active on 855K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently up 1.76 to 41.19.

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 0.1% to 31.10; compared to its 10-day moving average of 21.83. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) down 49c to 252.83 compared to its 50-day moving average of 266.76 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently down 3.54 to 828.10 on jobless claims and Federal Reserve governor

Blogging Options: CBOE Mid-Morning Update 10.16.14

With the market selling off sharply Tuesday, CBOE set records for volume in VIX Options (1.832 million), VIX Futures (791 K) , and with SPX options (~2.67million contracts).  VIX rose again, closing at a level not seen in quite a while (see Matt Moran’s blog from earlier this morning).  Overall options trading showed over 33.5 mm contracts trade. After the close WMT (-$1.50), NFLX (see below) and AMZN (-$4.20) let us know that the selloff had legs and would continue this morning.  The 10-year dropped 10 handles yesterday, while Asian and European stock were off ~1% to 2$ overnight.

Netflix (NFLX) is was down over $120 overnight, but is now off  $104 to $344.59 on less than expected Q3 results. October call option implied volatility is at 98, November is at 42, December is at 39, January is at 37, March is at 34; compared to its 26-week average of 35.

Goldman Sachs (GS) is lower by $5.24 to $172 after reporting Q3 EPS $4.57, consensus $3.21. October call option implied volatility is at 41, November is at 25, January is at 22; compared to its 26-week average of 19.

Closing prices coming into this morning’s session:

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This Past Week – VXST Up 113%, VIX Up 73.7%, VXTYN Up 55%

The S&P 500® (SPX) Index declined by 5.4% over the past week (ending Oct. 15), and many investors are looking for havens to help protect their portfolios from left tail risk.

As shown in the table below, over the past week the VIX Index rose 73.7% and the VXST Index rose 113.3%,

% CHANGES TO INDEXES FROM OCT. 8 TO OCT 15

One-week %

Change           Closing Value  Index

-5.4%               1862.49           SPX – S&P 500

14.5%              20.04               GVZ – CBOE Gold Volatility Index

43.8%              36.36               OVX – CBOE Crude Oil Volatility Index

44.8%              129.01             VVIX – CBOE VIX of VIX Index

55.3%              7.72                 VXTYN – CBOE/CBOT 10-year U.S. Treasury Note Volatility Index

56.8%              26.48               VXEFA – CBOE EFA ETF Volatility Index

73.7%              26.25               VIX® – CBOE Volatility Index®

113.3%            31.12               VXST – CBOE Short-Term Volatility Index

mm 1 10 16 unnamed

 

 

 

 

 

 

mm 2 10 16 unnamed

For more information on 26 volatility indexes and tools for risk management in volatile markets, please visit www.cboe.com/volatility.

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Preview attachment SPX Oct 15.jpgPreview attachment VXST Oct 15.jpg

CBOE Mid-Day Update 10.15.14

Volatility as an asset class

Airline stocks, on a roller coaster ride today, following reports the 2nd nurse infected with Ebola flew a few days ago (Oct 13). The CDC is reaching out to passengers who flew on Frontier Airlines flight 1143 Cleveland to Dallas/Fort Worth Oct. 13.

United Continental (UAL) is recently down $2.62 to $40.56. October call option implied volatility is at 98, November is at 81, December is at 68; compared to its 26-week average of 43.

Delta Air Lines (DAL) is recently down $1.63 to $31.22. October call option implied volatility is at 111, November is at 85, December is at 65; compared to its 26-week average of 38.

American Airlines (AAL) is recently down $1.50 to $29.99. October call option implied volatility is at 96, November is at 83, January is at 64; compared to its 26-week average of 39.

Actives at CBOE:  AAPL PBR TWTR TSLA NFLX AMZN FB BAC TSLA MU AMZN

Stocks with increasing volume @ CBOE: FCG TXT MDSO PPHM NTRS CCL RGP LLTC

CBOE Volatility Index (VIX) is recently up $4.31 to 27.05; Oct 17, 18, 25, 27, 30 & 35 calls active on 905K cboe.com/VIX
iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently up 3.02 to 41.90.

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently up 32.9% to 32.45; compared to its 10-day moving average of 20.44. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) down 4.18 to 251.82 compared to its 50-day moving average of 266.44 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently down 14.99 to 824.94 as bond rates collapse on deflationary concerns.

Blogging Options: CBOE Morning Update 10.15.14

Big option and VIX Futures day yesterday as markets firmed. Volatility as an asset class

Intel (INTC) is down 29c to $31.85 in the premarket on Q3 net income rising 12%. October call option implied volatility is at 35, November is at 29, December is at 24; compared to its 26-week average of 22.

Bank of America (BAC) is up 10c to $16.63 in the premarket on Q3 revenue falling 1.5% to $21B. October call option implied volatility is at 38, November is at 25, January is at 22; compared to its 26-week average of 24.

PNC Financial (PNC) is recently down 9c to $81.50 in the premarket after reporting results topping expectations. October call option implied volatility is at 38, November is at 25, January is at 19; compared to its 26-week average of 18.

Options expected to be active @ CBOE: SHPG ABBV INTC BLK USO AZN

CBOE S&P 500 95-110 Collar Index (CLL) at 638.35: www.cboe.com/CLL

CBOE Crude Oil Volatility Index (OVX) at 37.23, WTI Crude oil trades below $81. CBOE.com/OVX

CBOE S&P 500 95-110 Collar Index (CLL) closed @ 638.35: www.cboe.com/CLL

CBOE S&P 500 Skew Index (SKEW) at 127.78, compared to its 50-day moving average of 130.83. 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.

CBOE S&P 500 BuyWrite Index (BXM) at 1038.54 compared to its 10-day moving average of 1067.70 cboe.com/BXM

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Intel (INTC) Bullish Strategy Into Earnings

(Editors Note: We received this from John Voorheis, Keene on the Market, mid-day today before INTC’s earnings after the close today.  Enjoy).
Intel Corporation (Nasdaq: INTC, 31.97) is scheduled to report earnings after the closing bell on Tuesday.  Consensus analyst forecast $14.45 Billion of revenue with  EPS of $0.65 (last quarter’s EPS beat by nearly 6%, with the stock rallying over 9%).
Indeed, shares have been seemingly unstoppable in 2014, having rallied 22% year to date.  The stock has traded in a 52-week range of $23.03-$35.56 and has rallied on earnings announcements 3 of the past 4 quarters, but only 4 of the past 8.
The INTC Oct 32 Straddle expiring this Friday is projecting a move of about $1.70, or 5.3%.  One of the strongest headwinds facing the chip manufacturer was the imploding PC market, which has since stabilized.  Furthermore, Apple (Nasdaq: AAPL, 99.50) is rumored to be using the Intel M Core processor in its new Macbook Air Retina.
With the earnings report two days before the Apple announcement on October 16, I would only look to trade INTC to the long side.
My Trade:  Buy the INTC Oct 33-34 Call Vertical Spread for $0.25.
Delta:      Long
Gamma: Long
Theta:     Short
Vega:      Long
Breakeven: $32.25
October expiration is this Friday, October 17th

The Market is Getting ‘Sentimental’

One of the ways for us to understand the emotional state of the markets is to look at sentiment.  The spectrum of fear and greed is wide and when tallying up all the different indicators from VIX, to put/call ratio to polls and money flows we generally wind up near the middle.  At least that true in the long term, but in the short term we see anxiety, stress, worry and uncertainty in these very tools.  The recent rise in volatility is not hard to pinpoint in terms or rationale, there are many worries out there that are on the front burner and so many uncertainties – Ebola virus being just one of them (seems as if something new and scary comes out each day – how is that for uncertainty?).

What’s worrisome to most is the speed for which these moves are occurring.  Everyone seems to ‘know’ this market rally has gone on too far and too long (sarcasm), yet every time we hear ‘this is the end’ the markets turn right back up again.  I have to give the market the benefit of the doubt for now but to be certain this recent activity has me concerned about a continuation of the trend.

Is it different this time?  It sure feels the same as it did in prior downturns (sick to my stomach as the drops are sharp, swift and massive).  I suspect at some point irrationality of just ‘sell it all’ as we seem to be seeing/hearing now will fade.  Problem is, at what level will that happen?  If the chart and technicals show too much damage there will be resistance that is difficult to overcome.

But if we’re looking at the markets from 10,000 feet up we can see some major extremes were reached Thursday and Friday.  The disconcerting part is they were done so quickly.  The old adage, ‘markets go up taking the escalator and go down taking the window’ (hence, markets go down faster and more sharply than they rise).  So, let’s take a look at some of these sentiment indicators and their readings from an objective point of view, match them up with the charts and see where we may be headed.

I always like to start with the VIX, or annualized 30 day volatility.  This indicator has moved up to levels not seen since February, a more than 90 move higher from late August.  I won’t get into the reasons for the move here because any reason is good enough to hit the sell button and/or buy protection.  That has been evident since September, and when the ‘buy the dip’ crowd failed to materialize last month (on a few occasions) then there was a market vulnerability.  The good news – the VIX is sitting in rarefied air at the moment.  See this chart of spot VIX and the term structureFor years this has occurred sharply but is unsustainable (see the chart below by Steve Place of investing with options, with shows the VIX/VXV ratio and how unsustainable a ratio over 1 has been since late 2012).

BL 10 12 vix vxv

The put/call ratio has been showing the fear just as well as the VIX.  The total put/calls have recently hit some very high readings – the 21 moving average over .90, which is quite rare but augers a potential for a BIG rally when it turns back down.  My good friend Larry McMillan of option strategist says that when this turns lower and under .90 then it is a very strong signal that predicts a 100 handle move in the SPX 500.  (it is still rising, so any buy here is far too premature).  Further, we saw equity put/call ratios over 1 on three occasions this week, also another rare deed.  So, while not completely washed out yet this indicator is as stretched back as it could be.

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VIX Options Avg. Daily Volume Is Up 50% in October

Interest in volatility products and management of volatility and tail risk has increased this month.  Last week the futures on the CBOE Volatility Index® (VIX®) registered an all-time record high for one-week volume with 1,661,153 contracts.  As shown in the chart below, average daily volume for VIX options so far in October is about 50% higher than in September.

1111 - VIX options volume Oct 13During the past 3 trading days (through Oct. 13), the CBOE Short-Term Volatility Index (VXST) rose 87%, the CBOE Volatility Index® (VIX®) rose 63%, and the CBOE Mid-Term Volatility Index (VXMT) rose 26%.  Futures and options now are available on the VXST Index, which provides a market-based gauge of expectations of 9-day volatility, making it particularly responsive to changes in the S&P 500® Index.

1112 - VIX 2 charts Oct 13

The chart above shows the daily closing values for both the VIX Index and the near-term futures.  At the daily closing levels, the VIX was in contango on days such as July 2 and August 26, and it was in backwardation on October 13.

The chart below shows a comparison of prices for four of CBOE’s 26 volatility indexes – VXAPL, OVX, GVZ, and VIX.  Futures and options are available on the OVX, GVZ, VIX and other indexes. Note that there are days on which one or more of the volatility indexes can have distinct price moves.

1113 - VXAPL VIX Oct 14

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

CBOE Mid-Day Update 10.14.14

Volatility as an asset class

Wells Fargo (WFC) is recently down 55c to $49.65 after reporting in-line Q3 earnings. October call option implied volatility is at 27, November is at 19, January is at 20; compared to its 26-week average of 16.

Domino’s Pizza (DPZ) is recently up $6.90 to $82.63 after the company reported better than expected Q3 earnings per share and revenue. October call option implied volatility is at 30, November is at 21, December is at 20, January is at 18; compared to its 26-week average of 23.

Skyworks (SWKS) is recently up $5.36 to $50.65 after the company pre-announced better than expected Q4 results. October call option implied volatility is at 66, November is at 55, January is at 51; compared to its 26-week average of 35.

Actives at CBOE:  AAPL PBR AA TWTR TSLA NFLX AMZN FB C BAC GILD SUNE AMZN

Stocks with increasing volume @ CBOE: AMD SUNE CMCSA PBR VALE ABG AMJ SWI CIT INVE VIP PH AMLP CSX DPZ

CBOE Volatility Index (VIX) is recently down $3 to 21.64; Oct 18, 20, 21, 23, 24 & 25 calls active on 1M cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently down 2.86 to 36.74.

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 14.5% to 23.36; compared to its 10-day moving average of 18.74. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) up 2.09 to 258.14 compared to its 50-day moving average of 267.21 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently up 7.60 to 848.44 after three day sell off.

Blogging Options: CBOE Morning Update 10.14.14

Busy day at CBOE yesterday, as almost 7.5 mm contracts trade.  Volume leaders were SPX and VIX, each exceeding 1 mm contracts with ease.  VIX futures with ~523 k volume came within a whisker of setting a record (~530K).  VIX futures off to a strong start in the early session with volume of 50 K.  Earnings taking center stage this morning, led by the big banks. Volatility as an asset class

JPMorgan Chase (JPM) is down $0.76 to $57.48 in the premarket volatility after reporting Q3 EPS of $1.36 missing forecasts of $1.39. October call option implied volatility is at 33, November is at 24, December is at 22; compared to its 26-week average of 18.

Johnson & Johnson (JNJ) is up $1.00 to $100.14 after reporting Q3 adjusted EPS $1.50, consensus $1.44. October call option implied volatility of 31, November is at 20, January is at 15; compared to its 26-week average of 15.

Citigroup (C) is up $1.25 to $51.14 in the premarket on better than expected Q3 results and exiting its consumer business’s in eleven markets. October call option implied volatility is at 39, November is at 25, December is at 25, January is at 24; compared to its 26-week average of 23.

Options expected to be active @ CBOE: C JPM BAC INTC WFC JNJ BLK

CBOE S&P 500 95-110 Collar Index (CLL) at 638.55: www.cboe.com/CLL

CBOE Crude Oil Volatility Index (OVX) at 31.32, WTI Crude oil trades below $85. CBOE.com/OVX

CBOE S&P 500 95-110 Collar Index (CLL) closed @ 642.60: www.cboe.com/CLL

CBOE S&P 500 Skew Index (SKEW) at 130.36, compared to its 50-day moving average of 130.82. 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.

CBOE S&P 500 BuyWrite Index (BXM) at 1036.86 compared to its 10-day moving average of 1072.67 cboe.com/BXM

CBOE DJIA BuyWrite Index (BXD) at 256.07 compared to its 50-day moving average of 267.34 cboe.com/micro/bxd/
‏CBOE Nasdaq-100 Volatility Index (VXN) at 25.72; compared to its 50-day moving average of 19.61.

CBOE 3-Month Volatility Index (VXV) at 22.10, 50-day MA is 15.52 cboe.com/VXV

CBOE S&P 500 Short-Term Volatility Index (VXST) at 27.22, compared to its 10-day moving average of 18.08. VXST is a market-based gauge of expectations of 9-day stks.co/r0CS2

iPath S&P 500 VIX Short-Term Futures (VXX) is recently down 83c to 38.72.

CBOE Volatility Index (VIX) at 24.64, compared to its 10-day moving average of 17.61 and its 50-day moving average of 14.17. cboe.com/VIX

More

A Historical Perspective on Recent VIX Price Action

Since we haven’t had VIX in the mid-20’s for over 2 years it is probably worth getting a little perspective on recent volatility market price action.

The last time VIX was around these levels was early June 2012 when VIX got as high as 26.66.  VIX reached this level after the S&P 500 had dropped about 8.5% in a month.  On May 1, 2012 the S&P 500 closed at 1405.82 and by June 1st the S&P 500 closed as low as 1278.04.  The recent (and all time) closing high for the S&P 500 is 2011.36 from back on September 18th.   We are currently about 7.25% off the all-time high.  Only about 2.75% before the financial press starts frequently using the word correction.  To save you getting out the HP 12C a 10% drop from the high would put the S&P 500 around 1810.

As for the CBOE Volatility Index, looking back to May 1, 2012 VIX closed at 16.60.  Since 2008 was a more recent memory and we had yet to experience the great performance of 2013 VIX was higher and closer to a long term average.  On September 18 of this year VIX closed at 12.03 and we finished today at 24.64.

For the VXX watchers (or critics) from September 18 through today VXX is up just over 45%.  Not so bad for something that no one ever claims to have actually purchased.  Back in 2012, from May 1, 2012 to June 1, 2012 VXX rose about 41% – so VXX has done a little better in this mini-correction.

Finally, let’s get the real story and take a look at the VIX term structure change from Friday to today.  We all know the real VIXophiles don’t do anything without consulting the curve (nor should they).

VIX Curve 10132014

The moves in October and November, which mostly kept pace with cash VIX today, can be read one of two ways.   Either that’s some real panic and more is to come or that’s some real panic and you believe panic is an indication that a market bottom is close.  The one thing to agree on – VIX moving from 12 to the mid-20’s, VXX up 45%, and one of the most defined VIX term structure backwardations in some time all indicate that the dip buyers that have done so well for so long are on the sidelines for the moment.

13 Volatility Indexes Rose More Than 10% Today

Today the S&P 500 (SPX) Index fell 31.39 to close at 1874.74, and, as shown in the table below, thirteen of CBOE’s volatility indexes rose by more than 10%.

% Change            Close                     Ticker                    Index

24.0%                    27.22                     VXST                      CBOE Short-Term Volatility Index

22.6%                    66.70                     VXEWZ                 CBOE Brazil ETF Volatility Index

21.8%                    35.72                     VXXLE                   CBOE Energy Sector ETF Volatility Index

21.3%                    47.63                     VXAZN                  CBOE Equity VIX® on Amazon

20.1%                    28.49                     VXIBM                  CBOE Equity VIX® on IBM

16.0%                    131.57                   VVIX                      CBOE VIX of VIX Index

16.0%                    24.64                     VIX®                      CBOE Volatility Index®

13.7%                    33.77                     VXAPL                   CBOE Equity VIX® on Apple

13.7%                    25.72                     VXN                       CBOE NASDAQ Volatility Index

12.5%                    38.60                     VXGOG                 CBOE Equity VIX® on Google

11.5%                    22.53                     VXO                       CBOE S&P 100 Volatility Index

11.0%                    22.12                     VXV                       CBOE 3-Month Volatility Index

10.4%                      5.74             VXTYN        CBOE/CBOT 10-yr US Treasury Note Volatility Index

Some investors look to futures and options on volatility indexes for their potential to be used in diversification and tail risk management strategies.

VSXT ONE-WEEK CHART

The CBOE Short-Term Volatility Index (VXST) rose 24% today. VXST provides a market-based gauge of expectations of 9-day volatility, making it particularly responsive to changes in the S&P 500® Index.  Futures and options on VXST now are available.  Below is a one-week price chart for VXST.

1111mm

To learn more about volatility indexes and related strategies, please visit www.cboe.com/volatility.

More 2017 LEAPS® Listed Today

As of this morning, we are now 2/3 of the way through listing ETF and stock (equity)  LEAPS® options expiring in January of 2017.  Monday September 15th we added 2017 Leaps for stocks on the “January Cycle”.  This morning we added LEAPS on those stocks and ETF’s in the “February Cycle”,  and in five weeks we will finish adding LEAPS for stocks and ETF’s on Monday November 17th for those stocks in the March Cycle”.

As you may remember, we used to list LEAPS options for stocks and ETF’s  in the early summer for dates going out ~30 months.  The listing of LEAPS was pushed back a few months because our data showed they initially didn’t trade very much .

I suspect that most stocks and ETF’s in the March Cycle that have LEAPS now should have LEAPS added for 2017.   On the question of which stocks and what strikes will be added, that info will be available one week before the stocks in that cycle are added.

Monday, November 17, 2014: 2017 LEAPS begin trading
for March Cycle option classes.
A notice listing the new LEAPS series will be distributed during
the week of November 10th.

Notice listings for LEAPS can be found by accessing the
below hyperlink during the distribution week mentioned above.

http://www.cboe.com/tradtool/DailyNewListings.aspx

So the adding of LEAPS options for 2017 on stocks and ETF’s are almost finished.

Index Options with LEAPS have a slightly different listing schedule.  We’ll post it later this week.  mk

CBOE Mid-Day Update 10.13.14

Volatility as an asset class

Tech stocks share prices have had wide price moment resulting in higher option implied volatility.

Facebook (FB) is recently up $1.17 to $60.20. October call option implied volatility is at 40, November is at 47, December is at 40; compared to its 26-week average of 38.

Amazon.com (AMZN) is recently down $2.22 to $309.23.  October call option implied volatility is at 34, November is at 43, December is at 34; compared to its 26-week average of 34.

VIX methodology for Amazon (VXAZN)  up 17.2% to 45.98, above 50-day MA 28.65.

Netflix (NFLX) is recently down $9.87 to $442.02. October call option implied volatility is at 78, November is at 39, December is at 36; compared to its 26-week average of 35.

Tesla Motors (TSLA) is recently down $9.38 to $227.72. October call option implied volatility is at 57, November is at 58, December is at 49; compared to its 26-week average of 46.

Actives at CBOE:  AAPL TWTR TSLA NFLX PBR AMZN FB C BAC AMZN

Stocks with increasing volume @ CBOE: EDU DRYS CSX AMTD DAL

CBOE Volatility Index (VIX) is recently up 26c to 21.50, Oct 17, 19, 20 and 25 calls active on 613K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently up 2c to 35.90.

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently up 3.7% to 22.76; compared to its 10-day moving average of 17.63. stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) down 24c to 259.33 compared to its 50-day moving average of 267.41 cboe.com/micro/bxd/

S&P 100 Options (OEX) recently is recently down 1.10 to 852.20 amid light trading volume on global economic growth concerns.

Can The 200 Day Moving Average Halt The Downtrend? – Weekly Market Outlook

Not only was last week the worst week we’ve seen for stocks all year, it was the worst week we’ve seen since May of 2012.  All told, the S&P 500 (SPX) (SPY) plunged 61.77 points last week… a 3.1% decline.  We’re now 5.6% under the S&P 500’s peak of 2019.26, hit four weeks ago.  The decline on Friday also saw the BigTrends TrendScore give a week-ending bearish reading on stocks for the first time in some time.

Any chance that could be enough of a selloff to let the market get back in a bullish groove?  Maybe, but stocks are going to have to thread a very small needle to rebound from here without having more downside repercussions.

We’ll take a look at the market’s most likely scenarios in a second, right after a quick run-down of last week’s and this week’s key economic information.

Economic Data

Last week wasn’t a particularly busy week in terns of economic reports.  In fact, the only item of any real interest last week was the release of the FOMC minutes, which didn’t even end with the publishing of a piece of data.  It was still a key event, however, sending the market rocketing higher…. at least through the end of that day.

The crux of those minutes can be boiled down to two key sentences: “Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the US external sector. At the same time, a couple of participants pointed out that the appreciation of the dollar might also tend to slow the gradual increase in inflation toward the FOMC’s 2% goal.”

It was dovish to be sure, prompting a recovery rally right when it looked like the market was falling off a cliff.  The market ended up falling off a cliff later in the week anyway (more on that below), but it was still a short moment of glory before investors recognized there are still more challenges ahead that may be difficult to abate.

Earnings season gets underway in earnest this week.  Everything else is on the following grid:

Economic CalendarPH 101214-econ-data

Source: Briefing.com

Clearly the coming week will be busier; a preview of some of the harder-hitting data is on order.

On Wednesday we’ll get September’s retail sales figures.  The pros think weak automobiles sales are going to drag down overall progress here.  Taking planes, trains, and automobiles out of the equation, retail sales improvement should be on par with recent, decent growth.

Retail Sales % Change (month to month) Chart
PH 101214-retail-sales
Source: Thomson Reuters Eikon More

Blogging Options: CBOE Morning Update 10.13.14

Stocks firm in early trade after last week’s wild ride.  Columbus Day Holiday should have light trading – bonds closed, 3-day holiday for bankers and those with kids in school.  Balance of the week will be busy with Q3 earnings reports picking up and economic news.  European shares slightly higher, Asian shares off with NIKKEI down 1%.  10-year lightly traded but at 2.285%. Oil trading below $85.

Volatility as an asset class:   Companies that are developing treatments for the Ebola virus have seen their option implied volatility increase with their share prices

Chimerix (CMRX) October call option implied volatility is at 167, November is at 112, February is at 95; compared to its 4-week average of 81.

Tekmira (TKMR) October call option implied volatility is at 106, November is at 104, December is at 98, March is at 84; compared to its 25-week average of 100.

BioCryst (BCRX) October call option implied volatility is at 117, November is at 98, December is at 89, March is at 87; compared to its 26-week average of 80.

NewLink Genetics (NLNK) October call option implied volatility is at 115, November is at 134, December is at 186, March is at 188; compared to its 26-week average of 104.

VIX methodology for Apple (VXAPL) @ 29.69, compared to its 50-day MA of 26.43 CBOE.com/VXAPL

Options expected to be active @ CBOE: TKMR CMRX MT INTC C JNJ JPM WFC DHR NGLS TRGP APL ATLS CSX CP

CBOE Mini-SPX options $XSP @ 190.66, has weekly expirations CBOE.com/tradeXSP

CBOE S&P 500 95-110 Collar Index (CLL) @ 652.05: www.cboe.com/CLL

CBOE Crude Oil Volatility Index (OVX) at 30.03, WTI Crude oil trades below $85. CBOE.com/OVX

S&P 500 Weekly Options (SPXW) closed @ 1928.20 CBOE.com/SPXW

CBOE S&P 500 95-110 Collar Index (CLL) closed @ 642.60: www.cboe.com/CLL

More

The Week in VIX – 10/6 – 10/10

The weekly rise last week was the seventh largest percentage gain in the CBOE Volatility Index since 1990.  Admittedly VIX was coming off a low base, but I think that can be seen as an indication of just how lulled into complacency investors and trader have become by the stock market action of the past two or three years.  When buying the dips becomes a natural reaction and too easy we are close to the end of buying the dips becoming an easy trade.

VIX PA

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The Week in CBOE Strategy Indexes – 10/6 – 10/10

This past week was the first time the S&P 500 lost more than 3% in a week since May of 2012.  The pressure on stocks combined with this coming week being expiration week resulted in the three SPX oriented strategy indexes coming under pressure as well.

Strat Charts

As is expected each of these strategies gained a little ground over this past tough week for stocks.  This coming Friday is the third Friday of the month which means BXM, BXY, and PUT will all be rolling into November positions.  BXM is currently short the SPX Oct 2020 Call and BXY is short the 2060 Call both of which had no bid on Friday’s close.  PUT is short the SPX Oct 2015 Put which is over 100 points in the money but did finish Friday with about 6 points of time value.

Strat Tables

The Week in Volatility Indexes and ETPs – 10/6 – 10/10

I’m going to try to coin a phrase with respect to the combined curves below. Last week we were in a normal contango environment based on comparing VXST, VIX, VXV, and VXMT closing prices on October 3rd. This week we finished in a mirror image textbook backwardation based on those four volatility indexes. Comparing the two looks like a horn to me and I know if I keep thinking about it I’ll come up with something catchy.

VXST - VIX - VXV - VXMT Curve

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The Week in Short Term Volatility – 10/6 – 10/10

Last spring at the CBOE Risk Management Conference one of the speakers was asked what would it take for volatility to move to higher levels and remain there. His response was basically we would need to see two dips in the stock market without much of a rebound. It took a few months, but what he was talking about may have just happened last week. The consistent move higher in VXST definitely reflects a reaction to the type of trading activity he was talking about.

VXST PA

The VXST curve moved from contango to pretty dramatic backwardation as can be seen below.  The S&P 500 action last week resulted in VXST closing over 21 for the first time since February and the October 15th VXST future finished the week over 21 as well.  In the option space the VXST Oct 15th 23 Calls have the most open interest.

VXST Curve

Finally – the best place to find out everything you need to know about VXST is www.cboe.com/vxstms

The Weekly Options News Roundup – 10/10/2014

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.

Trading Volatility: It’s Just The Beginning
Volatility trading continues to gain traction among market participants.  In a post-Risk Management Conference interview, Paul Stephens, CBOE Vice President and Department Head, Institutional and International Marketing, talks about volatility’s emergence as an asset class, along with new product development at CBOE.

“We’re Still in the Early Stages of Volatility as an Asset Class” — Jack Stannard, Structured Retail Products.com
http://bit.ly/1sn0eBH

VIX Refresh
On Monday, October 6, the CBOE Volatility Index began to include S&P 500 Index (SPX) Weeklys options in its calculations.

“Weekly Options Hit the VIX” – Adam Warner, Schaeffer’s Investment Research
http://bit.ly/1sblKbb

Volatility Roller Coaster
Continued geopolitical turmoil this week caused the VIX Index to climb higher, creeping up to 22 earlier today.

“VIX Shoots to Eight-Month High in Selloff as Bears Reclaim Edge” – Callie Bost, Oliver Renick and Joseph Ciolli, Bloomberg
http://yhoo.it/1nfYPLE

“Rolling with the Punches” – Sarfraz Thind, The Trade
http://bit.ly/1tAY7pa

“Volatility Update: Here Comes the Earnings Parade” – JJ Kinahan, Forbes
http://onforb.es/1vN0CZ5

“Volatility Futures Broaden Appeal” – Markets Media
http://bit.ly/1CV3iHk

“Surging VIX Shakes Bulls as S&P 500 Charts Go Haywire: Options” – Joseph Ciolli, Callie Bost and Oliver Renick, Bloombeg
http://bloom.bg/1yWvqeC

“Volatility Looks Like Brush Fire Not Forest Fire to RBC” – Michael P. Regan, Bloomberg
http://bloom.bg/1CVbmb2

Risky Business
During these volatile times, S&P 500 Index (SPX) options can be a valuable tool in reducing risk, says the Options Industry Council.

“A Hedge That Helps Stock Investors Stay in the Game”– Steven M. Sears, Barron’s
http://on.barrons.com/1BRRpj3

Boo-tober
October is the time for frights, ghouls and nightmares…. and we’re not just talking about Halloween.  Historically, some of the scariest market crashes have occurred in October.  Should investors be scared this year?

“Fear: The New Value Stock” – Steven M. Sears, Barron’s
http://on.barrons.com/1pUL2Wo

“It’s October: How Scared Should You Be?” – Chana R. Schoenberger, The Wall Street Journal
http://on.wsj.com/1sdhRnr

CBOE Mid-Day Update 10.10.14

Volatility as an asset class

CBOE Volatility Index NASDAQ 100 (VXN) recently up 6.2% to 21; compared to its 10-day moving average of 18.68, 50-day moving average of 15.27.  NASDAQ 100 down 0.9%.

CBOE DJIA Volatility Index (VXD) is recently down 0.4% to 15.64; compared to 10-day moving average of 14.31, 50-day moving average of 12.83.  Dow Jones up 0.3%.

CBOE Russell 2000 Volatility Index (RVX) is recently down 1.9% to 22.90; compared to 10-day moving average of 21.44, 50-day moving average of 18.79.  IWM up 0.6%.

CBOE 100 Volatility Index (VXO) is recently up 1.3% to 18.33; compared to its 10-day moving average of 15.45, 50-day moving average of 12.73.   OEX up 0.2%.

CBOE S&P 500 3-month Volatility Index (VXV) is recently up 0.8% to 18.25; compared to its 10-day moving average of17.16, 50-day moving average of 15.38.

CBOE Crude Volatility Index (OVX) is recently up 7.6% to 29.25; WTI Crude future oil down 0.49% to $85.35.

CBOE Gold Volatility Index (GVZ) is recently up 2% to $18.22. GLD down 0.1% to $117.56  cboe.com/GVZ

CBOE EuroCurrency Volatility Index (EVZ) is recently up 3.6% to $7.83.

Actives at CBOE:  AAPL TWTR TSLA NFLX PBR AMZN FB C BAC
More

Weekly Market Commentary 10.10.14

The stock market has become extremely volatile, trading up and down
hundreds of Dow Jones points in a day. But our indicators have remained steadfastly bearish throughout the last few weeks. For example, despite several big rally days, $SPX never broke the downtrend line that connects its series of lower highs. Until that downtrend is broken, the $SPX chart will be bearish.

LM 10 10 14 spx

Equity-only put-call ratios remain on sell signals. The charts in
Figures 2 and 3 show that the ratios are racing higher now. As long as
they are trending higher, they are on sell signals.

LM 10 10 pc21
Market breadth has been swinging wildly back and forth. Six of the last ten days have seen +/-2000 breadth. That is quite unusual. Both breadth indicators are on sell signals, and both are in oversold territory. However, the market can
continue to decline sharply even while oversold.

LM 10 10 2 pc21_w
Volatility indices continue to rise, even though they have had some wide
swings, just as the stock market has. But the trend of volatility is higher,
and that is bearish.

LM 10 10 14 vix
In summary, the intermediate-term indicators are all bearish, so
even though oversold conditions are setting up potentially strong buy
signals, do not act on these buy signals until they are actually
confirmed.