Weekend Review – 3/23/2014

Barron’s –

Steven Sears column was very VIX centric discussing the impact that the Ukraine situation had on VIX futures volume.  Specifically he was discussing the increase in VIX futures trading volume that occurred during the wee hours of the morning in the United States.  Despite the US markets not being open, VIX futures volume spiked up as the quick crisis that was Ukraine vs Putin ran its course.   Based on that activity and interest from the Asian markets the CBOE Futures Exchange plans on extending VIX futures hours to almost 24 hours a day (there will be a 15 minute break) on June 22.  It was also noted that there are plans in the works to extend trading hours for SPX and VIX options as well.  I may never sleep again!

Options Action –

The guys started out for the second week in a row discussing ‘flyer’ stocks that were taking it on the chin.  This week’s list had Netflix (NFLX – 405.99), 3D Systems (DDD – 56.81), and SolarCity (SCTY – 65.05) noted as stocks with strong uptrends that gave some back on Friday.  Also while discussing the market action on Friday Scott Nations noted that the S&P 500 was trading at all-time highs and then quickly noted that VIX went down to the 14 level and closed at 15.00.  As he spends a lot of time focusing on volatility I paid close attention when he said, “14 is obviously a floor in VIX”.

The first trade took a look at one of the stocks on the list – 3D Systems – and it was mentioned that the mania around 3D printing may not be over and a pop to the upside may be in DDD’s future.   With the thinking that the stock is oversold, the trade is to buy DDD Apr 60 Call at 1.70.  Relatively speaking implied volatility for DDD options is on the low end of the spectrum so the trade is not a spread recommendation.  Also, if the stock does rally there would be some consideration of spreading off the risk which means selling a higher strike call option to either lock in a profit or reduce some of the cost of the call.

The next trade was on gold which is a market that I pay a lot of attention.  My interest stems more from the volatility end of things through watching the CBOE Gold ETF Volatility Index (GVZ – 16.43) which was down last week despite a 3 ½ % drop in the SPDR Gold Shares ETF (GLD – 128.47).  I discussed this in a blog earlier this weekend – http://www.cboeoptionshub.com/2014/03/22/week-gold-oil-volatility-3212014/ – where it appears that GVZ showed little panic despite a bad week for GLD.  The trade on Option Action is based on a bullish outlook.  The chart outlook sees GLD going back to the 150.00 range and the option trade involves buying GLD June 130 Call 3.50.  Like DDD volatility is low so the trade isn’t a spread trade, but buying an option.