Big Picture

Earnings season continues with results being somewhat mixed so far.  The economic calendar is fairly light this week.  We do get the EIA Crude Oi stockpile change numbers at 9:30 Chicago time – expectations are for a drop of 3.214 million, last week’s number was down 7.564 million. 

Tonight, the Bank of Japan will announce their interest rate decision (think FOMC in Japan) with expectations for the no change maintaining a short term policy interest rate of -0.1%.

Tomorrow, as the US gets up for the day, the European Central Bank will also announce their interest rate decision.  Expectations are for no change for the deposit rate of -0.4% and fixed rate at 0.0%.

Next Wednesday it is the FOMC’s turn with an announcement in the afternoon.  Currently the CME Fedwatch Tool has the market pricing in a 96.9% chance of no change in the target rate of 1.25%.  Looking farther down the road, the market has the December 13, 2017 decision being unchanged at 52.7%, this number was under 50% last week so the trend is pointing to the possibility of no interest rate change hike in 2017.

Overnight / Pre-Market

Markets are fairly quiet with stock futures mixed.  As of 7:15 am VIX has been in a narrow range 9.64 - 9.71. 

Stocks lower in reaction to earnings - CSX Corporation (CSX) down 4%, IBM (IBM) down 4% on light revenues, United Continental (UAL) down 4%.

Stocks higher in reaction to earnings - Morgan Stanley (MS) is up 3% on better trading revenues (GS had light trading revenues yesterday, MS win, GS lose?), US Bancorp (USB) up less than 1%. 

Vertex Pharmaceuticals (VRTX) up about 26% in reaction to positive news on a cystic fibrosis drug.  The implied volatility for VRTX options expiring this Friday was 42% yesterday and 50% for the follow week's expiration and there weren't any big bullish trade.  Stated differently, it appears the market wasn't prepared for a big move from VRTX. 

Looking Forward

Today standard July VIX futures and options settle on the market open, we will share the VRO print via twitter when it is available.  This is also standard expiration week for July equity and index options.  AM settled SPX and RUT cease trading tomorrow and settle on the open Friday. 

The VIX related ETPs that focus on the short end of the curve (long – VXX, VIXY, UVXY, TVIX / short – XIV, SVXY) will now own the August and September futures.  August is at about a 1.70 premium to spot VIX and September is about 2.75 higher than VIX.  Good for the short funds, bad for the long funds. 

Earnings season continues and accelerates with several large stocks reporting after the close today or before the open tomorrow.  The table below highlights three-year price reaction histories to earnings announcements for stocks that have Weekly options available for trading. 

Earnings 07192017

The full list of these stocks can be found at http://www.cboe.com/blogs/options-hub/2017/07/17/earnings-week-of-7-17-2017---7-21-2017

CBOE Webcasts

Today at 3:30 Central – Dan Passarelli discusses Chart Reading for Option Traders

July 26th at 3:30 Central – Dan Sheridan discusses The 15-Day Butterfly in SPX

More information and registration at www.cboe.com/webcasts

Today in History

An American Icon, Barbie, made her debut at the American Toy Fair on this day in 1959.  She was based on a German novelty doll that was marketed as a gag gift to adult men (some things you can’t make up).  Men would receive these dolls and their daughters would play with them, leading this becoming possibly the most successful toy in history.  Mattel has generated more than $1 billion in Barbie related sales since 1993.  Let’s all wish Barbie a happy 58th birthday.  

barbie-myer