Tuesday, December 20, 2016

Aqumin Volatility Newsletter 12-20-16 $NUGT

Making Gold

The equity market moves since Nov 8th have been nothing short of spectacular.  Essentially what many thought would happen did not, and the run into 2017 became a new ballgame.  Financials and commodities jumped, tech made a slight move and interest rate products tanked.  Not least of which was the inflation hedge gold.

On a pure snap of volatility using  AlphaVision, NUGT stands out as the most volatile name for its market cap. 3x levered products almost always lead for realized vol, so it is just a matter of which one.  NUGT has some of the largest 60 day vol (red) and 10 day vol (building height).  Which makes sense considering the free fall in gold and that makes it the vol leader of a volatile group.

That also brings me to the fun of the landscape. Outlying names only stay there for so long and gold is trading like inflation is dead.  Short term gold is ugly but longer term should rise.  Use the realized volatility for a short term short direction play, say a put time spread below the money in the Dec/Jan cycle for GLD and buy some longer term calls in NUGT for a pop.  If the realized vol holds the put time spreads should pay and maybe pay for all the NUGT calls.  Then ride the NUGT calls.

Read more from Andrew at Option Pit

Tuesday, November 1, 2016

Aqumin Volatility Newsletter 10/31/2016 $UVXY

It aint over until it’s over

Election shocks and surprises

The old saying “It ain’t over til it’s over” was never more true than last Friday.  A small change in the election game set volatility on fire again.  Generally what I like to see is standout volatility up or down for a ride in the volatility products.  Usually the vol products just decay but every once in a while there is a cause for an out of category volatility.  Even with the market clocking in single digit realized volatility UVXY found a way to jump off of the 3D map again.

UVXY is a levered product, but when the levered product gets way above all else it is noteworthy.  The dark red color in the AlphaVision® Landscape below, shows the lively 60 day realized volatility, with NUGT in the front of the group.  Height is what we want since that is the 10 day realized. UVXY is back out in front in the top 10% of 1 day relative moves which is how each decile of ETF’s is sorted.  The election will keep UVXY moving.

I expect UVXY and the volatility products to stay lively through the election with a binary move post- election.  There is now too much uncertainty to let volatility tank prior the Nov 8th a la The Brexit. I like long vol plays (call spreads in UVXY) in the shorter duration, but expiry after the Nov 8th, and a short vol play just farther out in the post-election run up.  The short vol can wait at least until the 7th.

Tuesday, October 18, 2016

Aqumin Volatility Newsletter 10-18-2016 $CHK

Someone CHK the Gas

There are finally some decent earnings to cheer about today.  Both GS and NFLX are up big on beating estimates.  For stocks that are at near all-time highs, great earnings are necessary to propel us higher.  Oil and Gas are doing better than ok this year to help Technology keep things moving.  The Energy group has been the big winner in 2016 with outstanding performance after a dismal start.  Energy lead by CHK has turned in the best relative performance so far this year (AlphaVision®Landscape group on the lower left) in the S&P 500.

CHK is a story from a famous ex-CEO to over production just in time for the crash in Nat Gas prices.  The $40 company is now a $6 company.  At some point they will be an asset play for someone with a very long view.  The Trend Reversal Landscape is showing a lot of red lately in the Energy group.  The poor 5 day relative performance is probably the group taking a pause after the big move to $50 in oil.  CHK clearly is not resting since 3 month performance (tallest building) is the best in the group and it is still rallying short term (green color).

On top of the recent performance there is a lot of call buying activity in CHK.  The near term volatility is bid sky high with the terms expiring prior to earnings.  Long ratio call spreads could work in here in the short term (buying 2 and selling 1).  Maybe the long winter for Nat Gas is over if the producers keep picking up a bid.

Read more from Andrew at Option Pit