The Week in VIX – 5/18 – 5/22

The VIX futures curve was lower last week with June losing more than the index or other futures as it was awarded the official title of “Front Month” with May VIX futures and options settling on the open Wednesday. Below I’ve changed things up a bit and the comparison is a year over year look at VIX and the VIX futures from Friday and a year ago on the Friday before Memorial Day.

Term Structure Plus Table

I was visiting the VIX pit with the attendees of the May version of The Option Institute’s Investing and Trading for College Students program shortly after the open on Friday. I actually heard this trade executed as an open outcry negotiation and knew what trade I was going to write about this weekend. There was a sale of 2725 VIX Jun 13.50 Puts at 0.47 combined with a purchase of 2725 VIX Jun 17.00 Calls at 0.57 (mostly at 0.57 – but this was the highest price so we’ll go with it). The net cost for this trade was 0.10 and a payout at June settlement that looks like the diagram below.

VIX PO

Note that there is risk below 13.50 due to the short put, but some real benefit if we get a spike in VIX between now and June VIX settlement which I have a feeling is what the l

The Week in Volatility Indexes and ETPs – 5/18 – 5/22

The S&P 500 moved up a little last week and the volatility curve moved lower. On the shorter dated end of the volatility term structure chart, there was the three day weekend effect which helped push VXST and VIX a tad bit lower than would be expected in front of a normal two day weekend. Just for the heck of it, I took a look at the curve 52 weeks ago and added it to the diagram below. I expected the 2015 pre-Memorial Day weekend curve to be higher than the 2014 version, but was surprised at the magnitude of the difference.

VXST - VIX - VXV - VXMT Curve

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Weekly Market Commentary 5.22.15

Everything is grinding to a halt in this market, and that is probably a sign that an explosive
move lies in the not-too-distant future. $SPX has support at the old highs (2120).
If that should fail, there should be a good support level at 2070.

 LM 5 22 15  spx

Equity-only put-call ratios remain on sell signals, according to the computer programs we use to analyze these charts.  However, it is obvious that these ratios have just been trending sideways for the past few days.

Market breadth has been something of a problem since last summer.
At the current time, these breadth oscillators are barely clinging to buy signals.

Volatility remains the most bullish technical area. $VIX dropped to its lowest levels since December. As long as $VIX is low and is not trending higher, stocks can continue to rise.

 

LM 5 22 15  vix

 

In summary, the move to new highs by $SPX has not been confirmed by most of our other indicators, nor by most other broad-based indices.  Still, that doesn’t seem to deter the market.  As long as $SPX holds above the support at 2120, there is no reason to get bearish.

http://www.optionstrategist.com/weekly-charts



Block Trade Analysis – $RUT 850 / 1160 Bull Put Spread

Author’s note – this is an updated blog from last week correcting the strike of the short put.   Thanks to Robert Shen for the catch.

Volume continues to rise in the Russell 2000 (RUT) option arena and my choices among block trades to discuss are on the rise as well. A trade from this past Tuesday caught my eye for three reasons. First, it was not a short dated deep out of the money credit spread – most of the trades I’ve come across and discusses recently in this space fit that description. Second, it is focused specifically on an outlook that matches the end of the first quarter which gives me a good chance to highlight quarter end options. Finally, it is what I consider a retail version of a cash secured put.

The specific trade was done in three lots mid-day on May 19th when the Russell 2000 was hovering around 1253. The size and option prices are approximations with the math being kept simple so we can focus on the concept behind the trade. About 3,000 RUT Jun 30th 1160 Puts were sold for 5.24 while the same number of RUT Jun 30th 850 Puts were purchased at 0.22. The net result is a credit of 5.02 and a payout at expiration that matches the diagram below.

Updated PO Diagram

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The Weekly Options News Roundup – 5/22/2015

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.

EUREKA!!!!
Earlier this week, CBOE announced it has entered into an agreement with Eurekahedge, a hedge-fund research and data collection company, to collaborate on the development of a series of new benchmark indexes designed to measure the performance of hedge funds that use volatility-based investment strategies.

“CBOE, Eurekahedge To Develop Vol Fund Benchmark Indexes” – Robert McGlinchey, EQ Derivatives
http://bit.ly/1HmHZyq

“CBOE to Develop Hedge Fund Benchmarks with Eurekahedge” – CBOE Press Release
http://ir.cboe.com/press-releases/2015/may-20-2015.aspx

One Step Further
Last month, CBOE launched options on the MSCI Emerging Markets and MSCI EAFE Indexes, bringing an added global dimension to CBOE’s index option franchise.  Included in the CBOE-MSCI partnership is the potential creation of volatility products on these new CBOE MSCI Index options.

“CBOE Scouts MSCI Options Future Vol Products” – Daniel O’Leary, EQ Derivatives
http://bit.ly/1PAUNuE

VIX FIX
This week’s “VIX FIX”…. the VIX Index dipped to near 2015 lows this week and the launch of new VIX Weeklys futures and options contracts is on the horizon.

“The Absence of Fear: How Low Can the VIX Go?” – Saumya Vaishampayan, Wall Street Journal
http://on.wsj.com/1K9bFlG

“Bored Volatility Traders Given Another Option With VIX Weeklies” – Callie Bost, Bloomberg
http://bit.ly/1F1yWl4

 

 

“Thanks to a Fine Canadian Doctor…”

(Editors Note: The following are thoughts from a floor trader friend on Memorial Day, who wishes to remain anonymous.  We have edited in this year’s dates and times. We ran this blog the last few years going into Memorial Day and received several nice comments.  We hope you enjoy it).

“Memorial Day” was called “Decoration Day” many years ago. It originated after the Civil War to commemorate Union and Confederate soldiers who died in the Civil War. I guess they figured out, over time, that all the other soldiers in other wars needed to be remembered.

I will visit my father’s grave site and see his military issued grave marker with his name, rank, date of birth/death, unit and conflict. In 1873, Secretary of War William Belknap adopted the first design for grave markers to be erected in cemeteries for soldiers who fought in that war. “Civil War”, “Revolutionary War”, “War of 1812″, “Spanish American War”, “World War I”, “World War II”, “Korea”, “Vietnam”, “Lebanon”, “Grenada”, “Panama”, “Persian Gulf” and “Somalia” are a few of the conflicts named on the stones.

If you are in Belgium this weekend, you can stop at Henri-Chapelle American Cemetery and my uncle, James K. McNulty is buried in plot f, row 11, grave 8. They have a ceremony Saturday at 4:00 pm CEST May 23, 2015 to honor the fallen heroes of the Battle of the Bulge. The townspeople will literally meet you at the train and guide you to the site with all the pride and dignity as if it happened yesterday.

There will also be a ceremony at Flander’s Field American Cemetery in Waregem, Belgium on Sunday at 3:00 pm.  We found 22 ceremonies in Europe that US service men and women will participate in to commemorate Memorial Day this year.

Major John McCrae, a Canadian military doctor, wrote the famous poem to honor the fallen and is why a red poppy is the symbol of Memorial Day:

in Flanders Fields the poppies blow between the crosses, row on row, that mark our place; and in the sky the larks, still bravely singing, fly scarce heard amid the guns below.

We are the dead. Short days ago we lived, felt dawn, saw sunset glow, loved and were loved, and now we lie in Flanders Fields.

Take up our quarrel with the foe: to you from failing hands we throw the torch; be yours to hold it high. If ye break faith with us who die we shall not sleep, though poppies grow in Flanders Fields.

have a great Memorial day Weekend…

Henri_Chapelle-memorial

CBOE Mid-Day Update 5.21.15

Volatility as an asset class

Best Buy (BBY) is recently up $1.78 to $35.46 after reporting Q1 adjusted EPS 37c, compared to consensus 29c. May weekly call option implied volatility is at 42, June is at 28, September is at 31; compared to its 90-day average of 32.

NetApp (NTAP) is recently down $4.19 to $31.45 after reporting less than expected Q4 report. May volatility elevated into Q4 and outlook. May weekly call option implied volatility is at 34, June is at 23, July is at 21; compared to its 90-day average of 28.

Lumber Liquidators (LL) is recently down $3.76 to $21.51 after announcing the resignation of CEO Robert Lynch. May weekly option implied volatility is at 105, June is at 73; compared to its 26-week average of 63.

Active calls @ CBOE: SPY 7/17/15 221, USO 8/21/15 22, GSK 8/21/15 50, TRQ 1/15/16 5, BABA 5/22/15 95, AAPL 5/22/15 130, HALO 6/19/15 19 $DAL 5/22/15 45

Active puts: NTAP 5/29/15 30.50, LQD 9/18/15 110, JBLU 7/17/15 21, TRQ 1/15/2016, YOKU 6/19/15 21, SPY 5/22/15 212.50, LULU 6/19/15 52.50

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIX) down 1.6% to 6.12 co/h2GXo

CBOE Emerging Mkt ETF Volatility Index (VXEEM) up 1.2% to 17 cboe.com/VXEEM

CBOE Crude Oil Volatility Index (OVX) down 4% to 32.41, WTI oil trades near $60.  cboe.com/OVX

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 3% to 18.89 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL BABA FB JPM YHOO AMZN AAL DAL BAC HPQ TWTR RAD QCOM

Options with increasing volume @ CBOE: MTZ LQD LBTYA AGEN OCR CVC NTAP BBY BRKR VOC

CBOE Volatility Index (VIX) down 48c to 12.40, day range 12.40 – 13.09 cboe.com/VIX
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CBOE, C2 & CFE Memorial Day Holiday Trading Schedule

We have another long weekend coming up.  Next Monday, May 25th, is Memorial Day in the U.S.

Tomorrow, Friday May 22st, CBOE, C2 and CFE  will have regular trading hours for all products.

On Sunday evening May 24th, CFE opens its extended trading session at 5:00pm CDT for VIX (VX) Futures and VXT, and will close at 10:30am Monday May 25th.

Monday May 25th, CBOE and C2 are closed for business, so there will be no Stock, ETF or Index option trading on that date.  Regular trading will resume Tuesday morning.

CFE Extended trading hours return to their regular schedule Monday evening at 5:00pm.
Trades in both the Sunday and Monday extended sessions will be submitted for clearing on the Business Day of Tuesday, May 26, 2015.

To recap, regular trading hours on Friday May 22nd on everything.  No option trading Monday May 25th at CBOE or C2.  Trading in extended hours sessions at CFE Sunday night and Monday morning in VX & VXT.  All extended hours CFE trades clear in Tuesday session. 

Have a good Memorial Day.

Earnings Next Week – 5/26 – 5/29

Next week is a short week, but there are ten companies reporting their earnings.

As always Max is the biggest gain in response to earnings, Min is the biggest drop, Abs Average is the average magnitude of the moves, and Last Q is what the stock did last quarter in response to earnings.  Finally, all numbers represent three years unless italicized which is this case is PANW and WDAY which both have 2 1/2 years of history to work with.

Earnings

Blogging Options: CBOE Morning Update 5.21.15

Lumber Liquidators with surprising CEO resignation has shares off 10% in early trade.  BLUE up 10% with possible new drug showing great results.  Existing Home Sales released after the opening.   Traders talking about hints that FED will raise rates sooner than later on “slack” in the economy not there any more.  Long weekend coming up.  Volatility as an asset class

Salesforce.com (CRM) is up $3.94 to $74.10 in the premarket on better than expected Q1 results and raised its 2016 outlook. May weekly option implied volatility is at 87, June is at 50, July is at 42; compared to its 90-day average of 38.

Williams-Sonoma (WSM) is up $3.11 to $81 after reporting Q1 EPS of 48c, compared to consensus 45c. June call option implied volatility is at 35, August is at 24, January is at 26; compared to its 90-day average of 25.

Omnicare elevated into CVS Health acquiring for $98 per share on CVS Health (CVS) acquiring for $98.00 per share in cash, for a total enterprise value of approximately $12.7B. June call option implied volatility is at 37, July is at 34; compared to its 26-week average of 25.

Equities options volume @ CBOE 828,220 481,436 1,309,656 total cboe.com

Options expected to be active @ CBOE: CRM BBY NTAP WSM OCR CVS AAL UAL LUV DAL ALK JBLU SAVE ALGT

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIX) at 6.22 stks.co/h2GXo

CBOE S&P 500 PutWrite Index $PUT @ 1508.10 CBOE.com/PUT

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CBOE Mid-Day Update 5.20.15

Volatility as an asset class

Southwest (LUV) is recently down $3.12 to $37.78 on concerns of worsening competitive backdrop and lean competitors vowing to compete aggressively. May weekly call option implied volatility is at 48, June is at 34, July is at 33 compared to its 90-day average of 33.

Delta (DAL) is recently down $2.35 to $43.84. May weekly call option implied volatility is at 43, June is at 34, July is at 33 compared to its 90-day average of 34.

American Airlines (AAL) is recently down $3.38 to $44.46. May weekly call option implied volatility is at 55, June is at 43, July is at 42 compared to its 90-day average of 40.

Active calls @ CBOE: ACHN 1/15/16 15, VXX 6/19/15 21, EWZ 6/19/15 40, UAL 6/19/15 65, SPY 6/5/15 220, WFC 6/19/15 55, AAPL 5/22/15 130, BAC 5/29/15 17, FB 7/17/15 85

Active puts @ CBOE: QQQ 7/17/15 106, VIPS 11/20/15 23, IWM 6/19/15 120, SPY 5/22/15 213

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIX) down 1.2% to 6.28 into minutes from the Fed’s last meeting stks.co/h2GXo

CBOE Emerging Mkt ETF Volatility Index (VXEEM) down 0.23% to 17.48 cboe.com/VXEEM

CBOE Crude Oil Volatility Index (OVX) down 2% to 34.03, WTI oil trades near $58.  cboe.com/OVX

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down -0.5% to 19.95 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL FB YHOO FB TWTR BAC TSLA BABA

Options with increasing volume @ CBOE: AAL DAL UAL LUV ACHN

CBOE Volatility Index (VIX) up 7c to 12.92, day range 12.81 – 13.27 cboe.com/VIX

IPath S&P 500 VIX Short-Term Futures (VXX) is recently up 8c to 19.22.
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Shift In TYVIX Term Structure

CBOE began publishing the term structure of TYVIX on April 24, 2015, providing the market with estimates of expected Treasury volatility through the first three expirations of CME OZN options (options on 10-Year Treasury note futures).

The TYVIX term structure provides a unique view of the market’s expectations of future Treasury volatility.  CBOE ticker symbols for the three volatilities are TYVIX1, TYVIX2 and TYVIX3. The chart below shows expected volatilities to May 27, June 24, and July 24, respectively. The gray bars show the number of days remaining until the May expiration.

The term structure changed from upward to downward sloping around May 1, immediately following the FOMC’s April statement.   The market read the FOMC announcement as indicating there would be no change in the target federal fund rate until at least September 2015, and this dampened expectations of future volatility.   Note in the chart below that nearby May volatility took a plunge below June and July volatilities, only to rebound in the last few days before the expiration of May 2015 OZN options.

tvix

 

Article written by Catherine Shalen

Blogging Options: CBOE Morning Update 5.20.15

Markets quiet overnight.  More Greece comments, US stock futures drift higher.  Altice (French telecom) being talked about by traders after entering US market.  Volatility as an asset class

Yahoo (YHOO) is up 3% to $42.22 in the premarket after selling off 7% yesterday.  Concerns were a possible change in U.S. tax regulations affecting Yahoo’s planned spinoff of its stake in Alibaba (BABA). May weekly call option implied volatility is at 66, June is at 40, July is at 35; compared to its 52-week average of 33.

Autodesk (ADSK) is $1.02 to $56.50 after the architectural software company lowered FY 16 guidance. June call option implied volatility is at 34, July is at 30, October is at 29; compared to its 90-day average of 30.

Staples (SPLS) is down 25c to $16.16 in the premarket after reporting inline Q1 and outlook May weekly call option implied volatility is at 160, June is a 32, September is at 31; compared to its 90-day average of 33.

Equities options volume @ CBOE 803,780 475,949 1,279,729 total cboe.com

Options expected to be active @ CBOE: YHOO BABA LOW TGT SPLS ADSK BBY PBY

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIX) at 6.36 into Minutes from the Fed’s last meeting will be released today  stks.co/h2GXo

CBOE S&P 500 PutWrite Index $PUT @ 1508.24 CBOE.com/PUT

‏CBOE Nasdaq-100 Volatility Index (VXN) at 14.15, compared to its 10-day moving average of 15.40.

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CBOE Mid-Day Update 5.19.15

Volatility as an asset class

Dick’s Sporting (DKS) is recently down $2.24 to $54.06 on inline Q1 results and strong Q2 guidance. June call option implied volatility is at 23, September is at 24; compared to its 90-day average of 26.

TJX (TJX) is recently up $2.65 to $69.91 after the retailer reported inline into Q1 results and strong Q2 guidance. June call option implied volatility is at 18, July and October is at 17; compared to its 90-day average of 20.

Take-Two (TTWO) is recently up $3.73 to $27.93 on better than expected Q4 results and conservative 2016
guidance.  June call option implied volatility is at 32, September is at 31, December is at 32; compared to its 90-average of 39.

Active calls @ CBOE: QQQ 7/17/15 114, AAPL 5/22/15 130, EEM 7/17/15 44, MNKD 1/20/17 7, BAC 6/19/15 16.50, CHK 5/22/15 15.50, UAL 6/19/15 72.50, SPY 5/22/15 213.50

Active puts @ CBOE: QQQ 7/17/15 106, VIPS 11/20/15 23, IWM 6/19/15 120, SPY 5/22/15 213

Active calls @ CBOE: GLD 6/19/15 125. PBR 6/19/15 11. ACHN 9/18/15 15. EEM 6/19/15 44.50, AAPL 5/22/15 130, TWTR 1/15/16 55. DISH 6/19/15 70, BG 6/19/15 92.50

Active puts @ CBOE: RIG 6/19/15 14, SPY 5/29/15 204, IWM 7/17/15 112

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIX) up 3% to 6.34 stks.co/h2GXo

CBOE Emerging Mkt ETF Volatility Index (VXEEM) down 1% to 17.31 cboe.com/VXEEM

CBOE Crude Oil Volatility Index (OVX) up 9% to 33.51, WTI oil trades near $58.  cboe.com/OVX

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 5% to 19.81 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL FB WMT MSFT BAC T NFLX HD

Options with increasing volume @ CBOE: RRGB OSUR ELNK EOX MBI ENDP URBN JO TTWO MMM

CBOE Volatility Index (VIX) down 8c to 12.65, day range 12.55 – 13.13 cboe.com/VIX
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