Are the Energy Stocks moving like Google or vice versa?
Just when you thought the Aqumin Volatility News Letter disappeared, you get something new in your inbox. The fact is Aqumin has been busy with opening an office in New York City and I have had zero time to monitor the market as we expand the business. I even had to halt my side job for TheStreet’s Option Profits with a solid run (79%+ win rate with all posted in print) there using AlphaVision™. Either way I wanted to take a look at the market again with the “Debt Crisis” going nowhere and Google’s (surprise!) return to big time profits and growth.
Most traders use a variety of cues and alerts to set off a trade or adjust a position. Using AlphaVision™ as a 3D Quoting System just means alerts are broader (you see the larger universe too) and cues are opportunity driven. Simply, you do not know what you are going to get when you pull up a view (which is where I think the edge is). I chose a set up of 30 Day Historical Volatility and 1 Week Price Total Return using Bloomberg Data.
The tall, spiky buildings have 30 Day Historical Volatility of 40% (Dark Green alert color) or more and 10% or more in 1 Week Total Return. Front and center is GOOG on news and earnings pop. Clearly a surprise for the market but what else looks close? That would be the standout Energy GICS Sector Group. Many of those names took off after a takeover in the group. At least for the S&P 500 (in this view) it is clear where the money is pouring into with pretty solid upward momentum (higher overall HV).
To me it looks like the Energy GICS Sector is getting a little ahead of itself, especially when compared to the rest of the S&P 500 and the one off GOOG move. I not saying run in front of the train but writing some out of the money calls or fitting some collars with the run up might not be a bad idea for holders of some of these names who have enjoyed the rally.
I normally would have stopped there with the post. But a secondary observation on how sustainable 40% 30 Day Historical Volatility is for the Energy names would be interesting. The new functionality in AlphaVision™ for Excel (we are shipping now) really helps the drill down after you have had a nice horizontal quote with the standard AV for Bloomberg Landscape. In the screenshot below I dug into all of the GICS Energy Stocks to look at 30 Day Historical Volatility to see if what I am noticing today is significant. Each Time Series Graph (left to right for the past year) shows 30 Day Historical Volatility (HV30) where my cut off is 40% on the upside (Dark Green) and 20% on the downside (Dark Red).
The names in this group don’t get over 40% HV30 very often (except for ANR). Last summer (far left of the 3D chart) when things were melting you notice the Dark Green “Euro Contagion.” Since then only select times when the HV30 pops above 40% for any particular Energy name in the S&P 500. Notice the trough in HV30 around January of this year. How did I come up with 40% on the upside? I just moved the slider bars in the interactive part of AV until I saw a significant level.
Looking at this 3D Time Series and with the run up in the Energy stock prices this is certainly better levels for selling volatility so let’s see how long the movement can last. But as I noted earlier, might be a good time to write some calls against existing positions.
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