Blogging Options: CBOE Morning Update 4.16.14

Housing Starts with a slight miss, economic news out of China somewhat murky.  After yesterdays wild ride, overseas markets higher, as are US futures. Industrial Production and Cap Use released shortly.  Options Expiration tomorrow with Good Friday trading holiday.

Volatility as an asset class

Yahoo! (YHOO) is up $2.49 to $36.80 in the premarket after reporting Q1 EPS of $0.38, $0.01 better than the analyst estimates. Also, Alibaba, the fast growing e-commerce giant in which Yahoo owns a 24% stake, said revenue surged 66% year-over-year to $3B. April call option implied volatility is at 76, May is at 46, June is at 39; compared to its 26-week average of 35.

Intel (INTC) is down $0.07 to $26.70 after reporting a 4.8% decline in Q1 profit. April call option implied volatility is at 41, May is at 21, June and October is at 19; compared to its 26-week average of 21.

Bank of America (BAC) is down $0.16 to $16.24 in the premarket, Q1 earnings hurt by resolving more mortgage issues. Overall option implied volatility of 26 is at its 26-week average.

Options expected to be active @ CBOE: BAC TWTR YHOO INTC FB PLUG GE TSLA

CBOE S&P 500 PutWrite Index (PUT) at 1396.30, compared to its 10-day MA of 1399.52 and its 50-day moving average of 1391.08. cboe.com/PUT

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Gamma of Volatility Gets Pasted – For Now

It looked real ugly this morning toward noon.  From what I could tell there was enough decent news to push stocks higher pre-open and then the flood gates of selling opened, hitting the momentum stocks particularly hard.  The on again/off again saga of the Russians camping out in the Ukraine is putting the market into a tizzy.  A near term weak market gets downright ugly when the liquidity dries up after countries start shooting at each other.

Putin’s incursion into Ukraine is looking like a big babushka doll trying to corral one of the little dolls back into place.  The Ukraine is not quite ready to hop back in so we keep watching.  This is a War Market, short term as it might be.  The players stay on the sidelines until something happens one way or another.  The low liquidity can cause big swings since the uncertainty of a shooting war is so random.

LivevolX (r) www.livevol.com

Look at the short term vol of vol in VXX.  With VXX trading over $46 things looked bad as short term vol of vol spiked.  By the end of the day, it tanked as the nastiness did not quite materialize.  Note, as we move into the close the vol products are not tanking.  Around a 16% VIX is feeling fair value until the War Market ends.  Your guess is as good as mine when that happens, but if things calm down watch out on the upside.

The Trade

I am adding to Emerging Market longs by selling put spreads and wheel-type trade in EDC and EWZ that are OTM.  If the VIX can’t go down, we can see more of the same tomorrow.   Disclosure- positions in EDC, EWZ.      ATG

BABUSKAS

CBOE Mid-Day Update 4.15.14

US stocks rallied, sold off and are currently sharply unchanged.  Option volume at 12:30 CDT was ~13.6mm, 3.925mm at CBOE.  SPX and VIX traded over 550k, SPY with 1.65mm contracts. Some slightly better Q1 Earnings news being overshadowed by shots allegedly fired in Ukraine.  NASDAQ still weak. 10-year at 2.62%.

Potash (POT) is up $0.82 to $34.71 on speculation that BHP Billiton (BHP) may again make a bid to take over the company after failing in a prior buyout attempt in 2010, according to the Globe & Mail. April, May and June call option implied volatility of 23 is near its 26-week average.

Zebra Technologies (ZBRA) is down $7.68 to $60.59 after agreeing to acquire Motorola Solution’s (MSI) enterprise unit for $3.4B.  May call option implied volatility is at 37, August is at 34, November is at 30; compared to its 26-week average of 24.

Comerica (CMA) is off 0.43 to $47.67 after reporting Q1 EPS 73c, consensus 72c.  May call option implied volatility is at 20, July and October is at 21; compared to its 26-week average of 23.

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

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Good Friday Expiration Week – Trading Holiday

This Friday, April 18th is the 3rd Friday of April.  It’s Good Friday, so April (regular) Expiration this week will be on Thursday April 17th.  Equities (stocks) will settle at the close of trading Thursday.  AM Settlement April options (e.g. SPX) settle on the opening Thursday, so the last day to trade those will be tomorrow afternoon, Wednesday April 20th.   CFE, C2 and CBSX will be closed as well.

The NYSE has been open for trading on three Good Friday’s, in 1898, 1906 and 1907.  Each of those years had an unusual reason for having the markets stay open.  The closing on Good Friday goes back to at least 1864.  Records on whether the exchange stayed open are not readily available before then, but it could go back to 1793.

So why is there no trading on Good Friday?  Best guess is lack of interest in trading that day.  Good Friday is a trading holiday in many European markets, and it being the holiest week in Christianity and many times coinciding with Passover week, probably not much would be trading.  Not many objections from traders in the Northern Hemisphere it being a Friday in mid-spring.

This brings up the question – “Why do options expire the third Friday of the month?”   I hear it was to keep away from the fixed Holidays and holidays that wouldn’t land in the third week, July 4th, Memorial Day, Labor Day, Washington’s Birthday (Feb 22), etc.  Can’t hide from Easter.  It’s the first Sunday after the first full moon after the vernal equinox.  That narrows it down to about a six-week range!

So Markets closed this Friday, Expiration moved up one day. Next scheduled trading holiday is Memorial Day, Monday, May 26th.

Blogging Options: CBOE Morning update 4.15.14

2″ of snow in Chicago area last night.  March CPI rose 0.2% (0.1% expected, +0.1% in Feb). Empire State Mfg fell to 1.29 (8.00 expected and off from last months 5.61.  New Orders fell below 0).  Last day to trade April VIX options. Volatility as an asset class:

Coca-Cola (KO) is up $0.94 to $39.66 in the premarket on Q1 earnings and revenue meeting analyst estimates on flat North American case volume as soda volume decreases 1%.  April call option implied volatility is at 22, May is at 17, August is at 15; compared to its 26-week average of 15.

Johnson & Johnson (JNJ) is up $2.08 to $99.22 after reporting Q1 adjusted EPS $1.54, compared to consensus $1.48. Overall option implied volatility of 16 is above its 26-week average of 14.

Infosys (INFY) is down $1.18 to $54.40 in the premarket after the Indian software company after reporting a 25% Q4 rise in profit last quarter aided by weak rupee, but forecast weak sales growth. April call option implied volatility is at 92, May is at 43, July is at 34, October is at 29; compared to its 26-week average of 33.

Options expected to be active @ CBOE: KO MSI ALU JNJ C FB PLUG YHOO BAC GOOGL IBM PNC USB

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Let The Dust Settle Here – Weekly Market Outlook 4.14.14

To say last week was a rough one for the market would be an understatement.  It was the biggest weekly loss we’ve seen since 2012, and perhaps worse than that, it really got traders wondering if stocks are far more vulnerable than they may have first thought.  And sometimes, that doubt can be more dangerous than any technical or fundamental problems the market may be facing.

We’ll dissect all of it below, beginning with our usual look at key economic numbers.

Economic Calendar

As we mentioned last week, there wasn’t much in the economic data lineup last week, and little of that was important.  The only thing that was of any real interest was Friday’s producer price inflation.  We’re finally seeing some much-needed inflationary pressure; as of last month the annualized producer inflation rate stands at 1.4%.  It’s a small hint that there’s finally some pricing power – a hint of economic strength – for suppliers and manufacturers (yet it’s not at debilitating levels – it’s at a healthy balance).  The picture will be completed this week when we get the consumer inflation data, though the feeling is that it too will show a modest perk-up towards healthier levels.

Economic Calendar

PH 41314-econ-dataSource:  Briefing.com.

You can see that this week will be a little busier this month, with a handful of these items capable of moving the market … IF traders can look past the panic selling that may continue after Thursday’s and Friday’s meltdown.

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This Week in Weeklys – 4/14/2014

Whoever said better late than never was late to something.  That would be me this week with the Weeklys preview.  With all the hub bub around here about VXST, traveling, and hosting college students from all over something had to fall through the cracks.  Luckily 27 of the 28 companies with short dated options available for trading that report earning have yet to release their numbers.  Citigroup (C) went this morning and it appears they kicked off the week in a very positive fashion.  Do keep in mind Friday is a holiday so any options that expire this week trade through Thursday.

As a reminder the table below is based on three years of data and the average move is an average of the absolute values of price changes in the past.  If I missed a stock or you have questions I may always be reached at rhoads@cboe.com.

Earnings COrrected

Blogging Options: CBOE Morning Update 4.14.14

Overseas markets mixed as tensions rise again in Ukraine, Traders talking about story from a Wall St. firm with in-depth report on VIX and market direction.

Volatility as an asset class

Citigroup (C) is up $1.34 to $47.10 in the premarket after reporting Q1 EPS ex CVA/DVA $1.30, consensus $1.14  April call option implied volatility is at 43, May is at 27, June is at 25; compared to its 26-week average of 25.

Facebook (FB) is up $1.03 to $59.56 on the social media internet portal looking to provide financial services for users, Financial Times reports. April call option implied volatility is at 45, April weekly is at 78, May is at 63, June is at 49; compared to its 26-week average of 44.

Yahoo (YHOO) is higher by $0.54 to $33.40 after being upgraded to Buy from Neutral at SunTrust. April call option implied volatility is at 57, May is at 46, June is at 39, October is at 38; compared to its 26-week average of 35.

Options expected to be active @ CBOE: C WBMD BAC GOOGL KO IBM KO PNC USB

CBOE S&P 500 PutWrite Index (PUT) at 1376.35, compared to its 10-day MA of 1403.24 and its 50-day moving average of 1389.23. cboe.com/PUT

CBOE S&P 500 BuyWrite Index (BXM) at 1021.52, compared to its 10-day moving average of 1042.80 cboe.com/BXM

CBOE DJIA BuyWrite Index (BXD) at 254.32, compared to its 50-day moving average of 255.60 cboe.com/micro/bxd/

CBOE S&P 500 Short-Term Volatility Index (VXST) at 17.64, compared to its 10-day moving average of 14.12. 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 35c to 44.40 in the premarket.

CBOE Volatility Index (VIX) at 17.03, compared to its 10-day moving average of 14.46 and its 50-day moving average of 15.09 cboe.com/VIX

SPDR S&P 500 ETF Trust (SPY) has reversed course and is up, at $182.40, ignoring  Ukrainian tension.

Calls with increasing volume at CBOE:
GM    6/21/2014   26K contracts
SIRI    6/21/2014   3.50 20K
QQQ 4/19/2014   86 14K
TLT    7/19/2014  113 14K
SPY   4/11/2014  183 13K
GM   6/21/2014 35 12K
VXX 5/17/2014   55 10K

This Week in VIX – 4/11/2014

VIX did what VIX does when the stock market sells off, it moved up.  Specifically VIX rose 22% last week settling just over 17 as the S&P 500 showed some real signs of weakness on Thursday and Friday last week.  April VIX futures and options trade for two more days and then expire this coming Wednesday morning.  Since there are only two trading days remaining before April VIX goes off the board the future was at a slight discount to the index.  The May future was just slightly lower which is an indication that the market may not believe this time the S&P 500 is going to rebound to new highs and push VIX back down to the lower teens.

Option trading on Friday was pretty interesting.  There appeared to be several instances of taking off long April call positions, but not rolling into May.  Could be with VIX at high levels traders are going to try to exit their April positions and then leg into May option positions on any VIX weakness.

Finally, I came across a couple of interesting posts this week related to my favorite topic (VIX) –

Jay Wolberg at Trading Volatility talking about a new uptrend in VIX and VIX Futures –

http://www.tradingvolatility.net/2014/04/say-hello-to-new-uptrend-in-vix-and-vix.html

Carley Garner of DeCarley Trading commenting on VIX as an indicator of market nervousness –

http://www.insidefutures.com/article/1195757/Markets%20on%20the%20brink…check%20out%20the%20VIX.html

VIX