Blogging Options: CBOE Morning Update 10.1.13

Volatility as an asset class

Merck (MRK) is up $1.35 to $48.95 in the premarket after announcing a redesigned operating model and plans to make 8,500 job cuts. Overall option implied volatility of 20 is near its 26-week average.

Walgreen (WAG) is off $0.45 to $54.41 on Q4 earnings increasing 26.9% to $702M. October weekly call option implied volatility is at 57, October is at 32, November is at 25, January is at 24; compared to its 26-week average of 24.

Diamond Foods (DMND) is down $1.55 to $22 in the premarket after reporting a Q4 loss widening to $96M on a litigation-settlement expense and a write-down of assets.  October call option implied volatility is at 52, November is at 43, December is at 44; above its 26-week average of 37.

The new CBOE S&P 500 Short-Term Volatility Index (VXST) and the popular CBOE Volatility Index (VIX) both reflect investors’ consensus view of expected stock market volatility. While the VIX measures expectations of 30-day future volatility, the VXST provides a new market-based gauge of expectations of 9-day volatility, making it particularly responsive to changes in the S&P 500® Index. With its nine-day snapshot, VXST is a tool for traders looking to target short-term moves with SPX Weekly’s options. http://www.cboe.com/micro/VXST/default.aspx

VIX methodology for Apple (VXAPL) closed at 32.36, above its 50-day moving average of 27.97.   www.cboe.com/VXAPL

Options expected to be active at CBOE; BAC NOK ALU BAC FB AAPL TSLA

CBOE S&P 500 BuyWrite Index (BXM) closed at $953.72, above its 50-day moving average of 959.77. www.cboe.com/BXM

CBOE Volatility Index (VIX) closed at 16.60, above its 10-day moving average of 14.29 and its 50-day moving average of 14.20. www.cboe.com/VIX

CBOE introduces S&P 500 Short-Term Volatility Index

CBOE S&P 500 Short-Term Volatility Index (VXST) a new market-based gauge of expectations of 9-day volatility

SPDR S&P 500 ETF Trust (SPY) is up $0.25 to $168.26 on the first U.S. government shutdown in 17-years weakening the dollar today, sending it to an eight-month low against the euro.

Calls with increasing volume at CBOE:

SPY 9/30/2013 169 14K contracts
GLD 12/21/2013 138 12K
IP 1/18/2014 60 9K
XLI 12/21/2013 50 7K
FB 10/19/2013 52.50 6K

Uncertain whether some government reports will be released this week with shutdown.