Update - I expanded on the information below in this video after writing this blog earlier today.
So, last week I looked at the implied volatility of various option markets that expired just before and just after next week’s election. You can read all about that here. Of course, as we all know, things changed a bit last Friday. When things change, I start running numbers. First I updated the table from last week[...]
After having a pretty good week shorting anything with a ticker (no, not really - just a few select names) and getting away with it, I got caught with my shorts up on Friday afternoon. Who can predict green ticks higher than the Empire State Building that materialize while you're waiting by the microwave for coffee to warm? So I decided to transmogrify the offending position into a Frankenstein's monster of sorts, fitting for the candy festival otherwise known as October 31st.
Stocks tried to get the market back in a bullish groove, staging a pretty solid advance on Monday of last week. It wasn't meant to be though. That rally effort petered out beginning on Tuesday, and then accelerated as the week wore on with the weight of a big Q2 rally still getting in the way. By the time Friday's closing bell rang most of the indices were within easy reach of a major support level. One stumble this week could finally pop this fragile (albeit short-term) bubble.
And if there was[...]
These next eight to ten days will be quite interesting as the outcome of some events will unfold, as the Fed policy and election uncertainties will create headaches for market players.
The Fed has a meeting this week and it is widely held they will not make a move on interest rates, rather they will continue to provide clues toward a December rate hike. Whether that is good policy shift is open to debate, but certainly there is a swarm of support to hike the rate before the end of 2016. [...]
The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX Index and volatility-related articles from print, broadcast, online and social media outlets.
CBOE Hosts Institutional “VIP” Summit
On Thursday, CBOE hosted its 1st ever Institutional VIP -- “Volatility Investor Program” -- Summit, a day of events for principal volatility managers and institutional allocators that focused on how volatility investing can be utilized to improve portfolio[...]
As a good number, but not all (some of us are White Sox fans) of the traders on the floor at CBOE were starting to think about where they were going to be that evening to watch Game 3 of the World Series, some news broke that shook the equity markets. I don’t need to regurgitate all that here. In fact, regurgitate is a good word to describe the election process this year.
The curve below is partially a result of the uncertainty around the election, but also reflects a relationship[...]
VIX had a pretty stellar week, aided by the new on Friday, to finish over 20% higher. Spot VIX may be buying into a new scandal, but the futures did not. The curve is as flat as it has been in months which tells me traders expect this move in VIX to be short lived.
We are all aware that VIX made a little move on Friday as new of a new chapter in the Clinton email saga commenced. As the week came to an end on trader took advantage of a rise in VIX and the December futures[...]
Last week the Russell 2000 (RUT) took it on the chin dropping 2.6% while the large cap focused Russell 1000 (RUI) was down only 0.80%. For the year RUT still has a small lead, up 4.55% versus up 3.98%, but that could quickly disappear next week.
The volatility spike that came Friday afternoon did what most surprising events do to the relationship between the Russell 2000 Volatility Index (RVX) and VIX. The ratio dropped, but is still above average for 2016.
The week ended[...]
OCT. 28 – On Friday afternoon a news story at wsj.com<http://blogs.wsj.com/moneybeat/2016/10/28/markets-rattled-by-fresh-fbi-review-of-clinton-email/?mod=djemalertMARKET> noted that –
“Worries about a surprise election outcome resurfaced anew in financial markets on Friday afternoon after the Federal Bureau of Investigation uncovered new evidence in its investigation of Democratic presidential candidate Hillary Clinton‘s email server. … The news sent ripples through[...]
On Monday, October 24, Admiral sent out a call spread on Lockheed Martin in anticipation of a bullish Earnings Report due PreMarket on October 25.
The DEC 240/245 call spread was filled @ $1.24.
Lockheed Martin announced 3rd Quarter Profit earnings of $3.61 per share on Revenue of $11.6 Billion and easily beat the estimates.
Being in profit with more than 150%, Admiral had the order ready to sell at the open, which was filled @ $3.10, not bad for a one day trade. As for Maury,[...]
In honor of National Chocolate Day, The Hershey Company (HSY) released what must be considered a sweet earnings report for investors. As I write this the stock is at 100.50 up 4.99 or just over 5% on the day. I decided in honor of the 'holiday' and HSY’s great results that I would go looking for a trade that correctly anticipated today’s rise in shares.
Early Thursday, with HSY trading around 96.75 there was a buyer of the HSY Oct 28th 99.50 Calls in several lots at prices[...]
As always the data below is based on the last three years of earnings results unless the ticker is in italics. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings. Finally, double check the earnings dates as not all were confirmed.
The following headlines appeared in the trade publications Pension & Investments….
“Hawaii assigns $1.6 billion total to 4 managers for options-based strategies” (March 21, 2016)
“South Carolina allocates nearly $1.9 billion to equity options, infrastructure strategies” (April 21, 2016)
The rationale for Hawaii and South Carolina’s interest in using options strategies to mitigate risk and enhance yields was outlined in the recent article in The Wall St. Journal…
So, what do Mexico and the Biotech industry have in common? They both seem to be braced for excess volatility following the US Presidential election. Before jumping into all that I’ll explain the table that sums all this up.
A couple of days ago I posted a blog showing that SPX option implied volatility jumped about 2 points when comparing at the money options. Our friends at CBOE LiveVol calculates ATM implied volatility for all option markets. Using that information[...]
In the October 22 Striking Price column in Barron’s, Steve Sears wrote --“keep an eye on the CBOE Volatility Index, or VIX. Already, some investors are preparing for significant volatility around the Nov. 8 election. Investors recently bought about 6,000 VIX Nov. 30 calls and about 9,000 Nov. 17 calls.”
IMPLIED VOLATILITY FOR S&P 500 PUTS
The table below shows samplings of implied volatility estimates for S&P 500 2100 options with select expiration dates. The Monday,[...]