CBOE Mid-Day Update 4.28.15

Volatility as an asset class

Merck (MRK) is recently up $2.90 to $60 on better than expected Q1 results and outlook. May call option implied volatility is at 18, June, July and October is at 17; compared to its 26-week average of 19.

Bristol-Myers (BMY) is recently down to $64.35 on better than expected Q1 results and outlook. May call option implied volatility is at 23, June is 23, September is at 21; compared to its 26-week average of 22.

UPS (UPS) is recently up $3.44 to $100.86 on better than expected Q1 results and outlook. May and June call option implied volatility is at 13, July is at 12; compare to its 26-week average of 16.

VIX methodology for Apple (VXAPL) down 19.7% to 27.56 compared to its 50-day moving average of 29.75. cboe.com/VXAPL

CBOE Russell 2000 Volatility Index (RVX) down 0.2% to 17.27, compared to its 50-day moving average of 16.94. www.cboe.com/RVX

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (VXTYN) up 2.6% to 5.16 cboe.com/VXTYN

CBOE Crude Oil Volatility Index (OVX) up 0.6% to 37.70 compared to its 50-day moving average of 49.26 as WTI oil trades near $57.  cboe.com/OVX

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 0.7% to 20.19 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL TWTR YPF TSLA PBR AMZN CLF X MRK DIS

Options with increasing volume @ CBOE: EOX IGTE TRP TCS YANG WHZ KOS HMC AXL CUDA

CBOE Volatility Index (VIX) down 1.3% to 12.95, high 14.23, low 12.85, May 15 & 20 calls active on total volume of 138K cboe.com/VIX

IPath S&P 500 VIX Short-Term Futures (VXX) is recently down 24c to 21.22.
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Blogging Options: CBOE Morning Update 4.28.15

Earnings in full swing this morning, led by Big Pharma’s.  PFE beat but guided lower, while MRK and BMY were up slightly in the pre-market.  European shares getting whacked (lower by more than 1%) and UK economy slowing at a bad time – two weeks before an election.  Case-Shiller reports Home Prices rising, as expected.  FED Minutes tomorrow. Volatility as an asset class:

Apple (AAPL) is up $1.35 to $131.63 in the preopen on Q2 revenue growth grew at a run-rate of 33% ex-currency and was iPhone strength in China. May weekly call option implied volatility is at 65, May is at 39, June is at 28; compared to its 26-week average of 26.

Corning (GLW) is higher by $0.12 to $22.50 after reporting better than expected Q1 results and outlook.  May weekly call option implied volatility is at 59, May is at 36, July is at 23, August is at 24; compared to its 26-week average of 27.

Ford (F) is down $0.03 to $15.88 in the preopen on reconfirming 2015 pre-tax profit guidance of $8.5B-$9.5B.  May weekly call option implied volatility is at 35, May is at 21, July is at 17, August is at 18; compared to its 26-week average of 25.

CBOE Interest Rate 5 Year Note (FVX) at 13.42 into Wednesday’s FOMC policy meeting decision

CBOE Crude Oil Volatility Index (OVX) at 37.46; compared to its 50-day moving average of 49.62, WTI Crude oil near $56. CBOE.com/OVX

Equities options volume @ CBOE 1,047,466 685,131 1,732,597 total cboe.com

Options expected to be active @ CBOE: AAPL TWTR WYNN GPRO COH F BP MRK UPS BWLD AKAM CRUS BMY GLW F PFE

CBOE S&P 500 Skew Index (SKEW) at 122.84. 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 95-110 Collar Index CLL @ 680.15 www.cboe.com/CLL

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Blogging Options: CBOE Morning Update 4.27.15

Traders watching events overseas this morning.  China is hinting at QE, while Japan is lowered one notch by a ratings agency.  Apple earnings after the close, Q1 GDP before the opening Wednesday and FOM Minutes Wed PM.  GDP forecast has been retreating as weather and California dock strike blamed, consensus down to ~1.1%. AMAT ( -$1.50 ) merger off, AXP & TWTR downgraded before the bell, both off fractionally, DB off 4% on restructuring.  40 degrees this morning in Chicago, we’re ready for Spring any time.  NFL & City begin blocking off streets near CBOE for NFL Draft beginning Thursday night.  Volatility as an asset class:

Apple (AAPL) is up $1.60 to $131.88 in the preopen into the expected release of Q2 results today. May weekly call option implied volatility is at 50, May is at 35, June is at 28; compared to its 26-week average of 26.

VIX methodology for Apple (VXAPL) at 34.27 compared to its 50-day moving average of 29.55 cboe.com/VXAPL

GoPro (GPRO) is up $0.21 to $44.94 on the expected release of Q1 results April 28. May weekly call option implied volatility is at 90, May is 63, June is 54, July is at 50; compared to its 26-week average of 57.

CBOE Crude Oil Volatility Index (OVX) at 37.61; compared to its 50-day moving average of 50.04, WTI Crude oil near $57. CBOE.com/OVX

Equities options volume @ CBOE 1,155,044 calls, 696,136 puts, 1,851,180 total cboe.com

Options expected to be active @ CBOE:  Options expected to be active @ CBOE: AAPL TSLA WYNN GPRO TWTR MRK BP BWLD AKAM CRUS

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Russell 2000 Weekly Recap – 4/20 – 4/24

Small cap stocks were lower on Friday and the Russell 2000 didn’t get much love as the Nasdaq-100 and S&P 500 put up all-time highs last week. Despite RUT lagging a little there were a couple of Friday trades that at minimum expect the Russell 2000 to stay around current levels over the next few weeks or months.

First, there was a trade that seems to expect a neutral to bullish for small cap stocks over the next few months. Early in the day, someone came into the Russell 2000 pit and sold 1500 RUT Jul 1250 Puts at 33.23 and then purchased 1500 RUT 1150 Puts for 11.23. The net result is a credit of 21.80 which is equal to the maximum potential profit at expiration. That is as long as the Russell 2000 closes over 1250. A partial profit may be realized if RUT is over 1228.20 and losses are capped at 78.80 if the Russell 2000 settlement for the July 17th contracts is below 1150. In order to realize this maximum loss RUT would need to go down by just over 10%.

RUT PO

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The Week in VIX – 4/20 – 4/24

VIX finished the week at 12.29 which is the lowest close since early December. Despite the S&P 500 making a new all-time high to finish the week, the May VIX futures settled at 14.625, a decent premium relative to VIX. We saw this last month until the Non-Farm Payrolls release. After the number the premium came in pretty quickly. We have to wait to see if the pattern repeats as the number does not come out until Friday May 8th.

VIX

One of the most dynamic VIX spread trades is a risk reversal in which an out of the money put is sold and subsequently an out of the money call spread is purchased. I have seen many of these trades done at either a credit or debit with the worst case scenario being VIX at very low levels at expiration. The trade that caught my eye on Friday sold 9,500 VIX May 13.50 Puts at 0.38, purchased 9,500 May 17.00 Calls for 0.67 and finished things off by selling 9,500 May 23.00 Calls for 0.28 and a net cost of 0.01 (excluding commissions). The payout at expiration appears below.

VIX PO

I highlighted the profit or loss at expiration (in purple) for different significant levels on this diagram. Starting on the left -3.51 shows the loss per spread if May VIX settlement is at 10.00. That would be a record low settlement and the all-time low for VIX is 9.89 so I think 10.00 is a reasonable floor, although it is possible for VIX to dip under 10.00.   Between 13.50 and 17.00 this trade loses 0.01 as all options would expire out of the money. From 17.01 to 23.00 there would be a partial profit and then finally things are capped at 23.00 with a profit of 5.99.

Finally, I am aware a naked short put position is not appropriate for all traders (or allowed). I was going to add a note here saying that one might always purchase the May 10.00 Put for 0.05 to replicate the trade, however, when I checked the quotes the May 12.00 Put was offered at 0.05 on Friday so that option may have been bought for 0.05 to fit a trader’s permission level, but this would also result in downside risk of 1.56 instead of 3.51. That may be worth the 0.05 regardless of what a trader is allowed to do in their account.

The Week in Volatility Indexes and ETPs – 4/20 – 4/24

The S&P 500 managed to reach a record high for the sixth time this year, but all the applause from bulls last week was for the Nasdaq-100 which made an all-time high for the first time in 15 years. All hail tech!

All four volatility indexes that are based off S&P 500 option pricing moved lower last week and three of the four are below the 2014 average. Only VXMT, the 6 month version of VIX, remains elevated relative to the 2014 average. I guess bears may be throwing in the towel for the summer and considering regrouping in the fall.

VXST - VIX - VXV - VXMT

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The Weekly Options News Roundup – 4/24/2015

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.

New Products at CBOE
Options on the MSCI Emerging Markets Index (EM) and the MSCI EAFE Index (EAFE) made their trading debut on CBOE this week.  Andy Lowenthal, Vice President of Business Development at CBOE, discusses these products, and other initiatives, with CT Financial News.

“Interview: CBOE Exec Talks Product Strategy”– Diane Alter, CT Financial News
http://bit.ly/1HAwDuc

VIX ABC’s
Markets will always experience periods of both calm and not so calm.  Knowing how the VIX Index works can provide protection for investors during times of either.

“Under the Hood: Understanding Volatility and the VIX, Pt. 1 – Mike Patton, Think Advisor
http://bit.ly/1IQXVLy

Volatility: Friend, Not Foe
VIX products can be effective hedging tools – whether you’re looking to take the fear out of trading in volatile markets, or taking advantage of quiet periods to position for future vol.

“How the VIX Can Make Fear Your Friend in a Volatile Market” – Alexandra Cain, AFR Weekend
http://bit.ly/1yXASyB

“Taking Advantage of Low Summer Volatility” – Jamie Chisholm, Financial Times
http://on.ft.com/1z1Eekr

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CBOE Mid-Day Update 4.24.15

Volatility as an asset class

Altera (ALTR) is recently down 46c to $41.63 after the semiconductor company reported Q1 results that missed expectations. May call option implied volatility is at 72, June is at 67, September is at 41; compared to its 26-week average of 28.

American Airlines (AAL) is recently up $1.55 to $53 on Q1 earnings nearly doubling. May weekly call option implied volatility is at 34, May is at 37, June is at 34, August is at 36; compared to its 26-week average of 42.

Comcast (CMCSA) is recently up 11c to $59.35 after dropping its proposed acquisition of Time Warner Cable (TWC). May weekly call option implied volatility is at 20, May is at 23, June is at 22, July is at 21; compared to its 26-week average of 22.

VIX methodology for Amazon (VXAZN) down 37% to 26.56 compared to its 50-day moving average of 31.02 cboe.com/VXAZN

VIX methodology for Google (VXGOG) down 31% to 18.74, compared to its 50-day moving average of 23.50 cboe.com/VXGOG

VIX methodology for Apple (VXAPL) up 4% 33.48 compared to its 50-day moving average of 29.54 cboe.com/VXAPL

CBOE Russell 2000 Volatility Index (RVX) down 0.3% to 15.77, compared to its 50-day moving average of 17. www.cboe.com/RVX

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (VXTYN) down 5.86% to 4.82 cboe.com/VXTYN

CBOE Crude Oil Volatility Index (OVX) down 1.6% to 37.37 compared to its 50-day moving average of 50.06 as WTI oil trades near $58.  cboe.com/OVX

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 3.2% to 19.71 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL NFLX TWTR PBR TSLA AMZN MSFT PBR

Options with increasing volume @ CBOE: CLF DIS AERI UEC NUAN DSW CHU SVU PII ACTG GIMO JNPR

CBOE Volatility Index (VIX) down 1% to 12.36, high 13.02, low 12.16, May 19 & 23 calls active on total volume of 194K
cboe.com/VIX

IPath S&P 500 VIX Short-Term Futures (VXX) is recently down 23c to 20.86.
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Weekly Market Commentary 4.24.15

Both bulls and bears are frustrated by recent action. Most recently, $SPX has made repeated attempts to challenge the all-time highs, but it has not yet been able to break out.  There is resistance in the 2110- 2120 area that has contained all advances.

LM 4 24 15 spx

In any case, the $SPX chart is still neutral until it breaks out of
the triangle in a convincing way.

Equity-only put-call ratios have been bullish since around the first of the month. But
this week, they began to curl upwards — a move which could lead to a sell signal if it
were to persist.  To the naked eye, the weighted chart definitely looks like it has begun
to trend higher.  However, the computer programs that we use to analyze these charts do not see a sell signal forming.   So, officially these two ratios are still on buy signals.

Stronger breadth in the last couple of days has rolled the breadth oscillators back over
to buy signals, with modest overbought readings. Volatility indices and derivatives continue to paint a bullish, but overbought, picture for stocks. $VIX is below 12.50 now, certainly an overbought condition. However, the market can advance while overbought conditions exist.

LM 4 24 15 vix

In summary, the indicators are marginally bullish, but $SPX has not broken out
to the upside yet.  At this point, it seems inevitable that it will, but
we want to confirm it before buying.

Blogging Options: CBOE Morning Update 4.24.15

Earnings and the Comcast non-deal seem to be the focus this morning.  Futures mixed.  Durable Goods beat but it’s all related to Aircraft orders.  Core Rate -0.2% (+0.3% consensus expectation).  Biogen is off over $20 on disappointing sales of a new drug.  AAL up on earnings beat but gave a warning on upcoming currency translations.  Volatility as an asset class:

Amazon.com (AMZN) is up $43.51 to $432.77 in the premarket after reporting better than expected Q1 results and cloud growth.  April weekly call option implied volatility is at 163, May is at 50, June is at 37, July is at 34; compared to its 26-week average of 33

VIX methodology for Amazon (VXAZN) at 41.55 compared to its 50-day moving average of 31.05 cboe.com/VXAZN

Google (GOOG) is up $18 to $565 as Q1 revenue growth was hurt by the rising dollar. April weekly call option implied volatility is at 95, May is at 29, June is at 22; compared to its 26-week average of 24.

VIX methodology for Google (VXGOG) at 27.15, compared to its 50-day moving average of 23.54 cboe.com/VXGOG

(Editors Note:  Did you watch the Weekly Weeklys segment yesterday on CBOETV, also posted here?  Angie Miles talked about traders expecting a 4% move in GOOG and a 6.4% move in AMZN after the earnings announcement this morning.  Just sayin…).

Starbucks (SBUX) is up $1.95 to $51.38 in the premarket on better than expected revenue on strong traffic increases. April weekly call option implied volatility is at 63, May is at 26, June is at 22, July is at 20; compared to its 26-week average of 23.

VIX methodology for Apple (VXAPL) at 32.16 compared to its 50-day moving average of 29.39 cboe.com/VXAPL

CBOE Crude Oil Volatility Index (OVX) at 37.97; compared to its 50-day moving average of 50.52, WTI Crude oil near $57. CBOE.com/OVX

Equities options volume @ CBOE 1,052,971 calls, 691,952 puts, 1,744,923 total cboe.com

Options expected to be active @ CBOE:  AMZN GOOG GOOGL SBUX MSFT TYC P BIIB JNPR

CBOE S&P 500 Skew Index (SKEW) at 123.26. 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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Block Trade Analysis – EEM Ratio Spread

Late Wednesday a big trader came in who appears to have a pretty specific opinion about the Emerging Market Sector.   With less than an hour to go in the trading day there was a buyer of 25,000 EEM May 43.50 Calls at 0.66 who then also sold 50,000 EEM May 44.50 Calls for 0.26. The net result was a trade that does well if EEM moves higher over the next few weeks but not too high. The payoff diagram below shows how this works with a discussion to follow.

EEM PO

If held to expiration, this trade turns a profit between 43.64 and 45.36. The best case scenario would be EEM closing at 44.50. At this level the 43.50 Calls are worth 1.00 and the 44.50 Calls expire with no value. Above 44.50 this position starts to lose value and the losses can continue as this trader is short twice as many 44.50 Calls as he is long of the 43.50’s.

Finally, if you have an interest in the Emerging Market sector, check out www.cboe.com/msci to learn more about index options on the MSCI Emerging Markets Index as well as options on the MSCI EAFE Index.

Investing and Trading for College Students

It’s that time of year again at The Options Institute where we prepare to welcome a couple dozen or so students to our Investing and Trading for College Students program. The first session is scheduled for May 19 – 22 with the end of summer session running from August 4 – 7.  In addition to spending time at the CBOE this program includes visits to a variety of investment and trading firms in the Chicago area.

For more information click on the link below –

Investing and Trading for College Students

Weekly Weekly’s Option Report 4.23.15

The titans of tech dominate this week’s Weeklys report. Apple, Twitter, Google, Amazon and Microsoft all have earnings coming up in the next few sessions. I’m Angela Miles covering weekly options expiring this Friday and next Friday May 1st.

A big night of earning is ahead with Amazon, Google and Microsoft all reporting after the close…

Amazon has been getting plenty of options paper flow going into earnings. The options market implies a fairly sizable move is possible either up or down off of earnings in AMZN as way out-of-the money calls and puts trade today. The stock is $390 and puts are active down to 310. Call paper is active up to 440 with those contracts going for $2.20. The straddle for Amazon is implying an 8% move is possible this week. That’s a decent sized swing compared to the straddle suggestion last year ahead of earnings of 6.4%.

Traders will be watching for advertising numbers  in Google’s results.  GOOG trades $551 and way out-of-the money calls and puts are active similar to Amazon’s options paper. Calls are active up to the 600 strike and puts down to 520. Perhaps some trades find this strategy less expensive than an at-the-money position. The straddle suggest around a 4 percent move.

Trading in Microsoft (MSFT) has been relatively quiet compared to other tech names, but today paper is solid. The straddle at 43 in MSFT predicts a 3.5% move. Puts are in action at 40.5 calls as the stock trades $43.

There’s a lot more happening after the bell…

Starbucks traders are building positions in SBUX into tonight’s earnings. The underlying stock is $48 and call paper is heavier than put paper. Call contracts are generating a number of buyers at the 49 and 50 lines. The 49.5 straddle forecasts a $1.90 move up or down, which translates to around 4.5%.

Also after the bell, Altera reports. And, as ALTR trades $42 there is a demand for 41 puts and upside calls at 44. The bid ask spread is wide. The straddle points to a 5% move. Altera needs to turn in a solid performance after talks reportedly broke off with Intel.

Monday promises to be busy with big Apple turning in earnings. AAPL has rallied this week to $129. This week’s weekly options are mostly active on the call side at 130 and 131. Next week (May 1 expiration) calls are in motion up to the 135 line. The straddle at 129 prices at $7 suggesting around a 5% move.

Mylan has been making news headlines with its recent takeover bid from generic drug maker Teva.  MYL has an earnings day Monday. The stock trades $73 call players are building positions with the 73, 74 and 75 strikes.

On Tuesday next week, traders will turn their attention to Twitter…

Twitter is popular in weekly options and is trading around $51. Upside call buyers are in the 52 and 55 strike contracts for this week’s expiration and next week’s expiration. The options market suggests an 11% move is possible.

Thursday’s earnings roundup includes Gilead Sciences…

Gilead has been very active into earnings. It’s one of the most popular biotech trades in the options world. As GILD trades $104, put players are active at 95 and 100 strikes for next weeks expiration.

SPX is finding put buyers in tomorrow’s expiration with the 2,085 and 2,100 strikes, and call players at 2,140.

Taking a look at changes to the list of available Weeklys:
Interdigital has been added, the ticker symbol is: IDCC.

On my In The Money show today Trader Tim Biggam reveals his Weeklys SPY strategy as volatility remains low.

That’s it for now. Thanks so much for following the options action with me on CBOETV.com. You can also follow me on Twitter @AngieMiles.  Have a great Thursday.

CBOE Mid-Day Update 4.23.15

Volatility as an asset class

PepsiCo (PEP) is recently down 94c to $96.34 on solid Q1 results and sees FY15 organic revenue growth in mid-single digits. May weekly call option implied volatility is at 15, June is at 13, July is at 12; compared to its 26-week average of 18.

Caterpillar (CAT) is recently down 45c to $84.40 after raising its profit outlook for the year after reporting better than expected Q1 results. May weekly call option implied volatility is at 21, May is at 18, June is at 18, August is at 19; compared to its 26-week average of 23.

Southwest (LUV) is recent up 90c to $43.75 on Q1 earnings more than doubling on record load factors. May weekly call option implied volatility is at 28, May is at 29, June is at 28, September is at 29; compared to its 26-week average of 33.

CBOE Russell 2000 Volatility Index (RVX) down 1% to 15.86, compared to its 50-day moving average of 17.11. www.cboe.com/RVX

CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (VXTYN) down 0.19% to 5.16 cboe.com/VXTYN

CBOE Crude Oil Volatility Index (OVX) up 0.3% to 39.13 compared to its 50-day moving average of 50.54 as WTI oil trades near $58.  cboe.com/OVX

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 1.7% to 19.33 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL NFLX TWTR PBR TSLA TWTR AMZN AA CMCSA DOW

Options with increasing volume @ CBOE: SFUN KORS ARRS UEC ALL IDTI HZNP SKX EWT WHZ CSX BMO

CBOE Volatility Index (VIX) down 2.7% to 12.38, high 12.96, low 12.12, May 19 & 23 calls active on total volume of 170K cboe.com/VIX

IPath S&P 500 VIX Short-Term Futures (VXX) is recently down 20c to 21.09.
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