With Aqumin being based in Houston, I thought it would be worth mentioning that the WSJ this morning reported that the USA is a net exporter now of petroleum products for the first time in 62 years. I think that is a big deal, especially when the country is looking for symbols to pull everyone out of this anti-capitalist fog. If we could just tackle the budget issues with the same ingenuity that we now use to look for and find oil with we would be off to the races again. One can dream… The good Petrol news is one more long term reason to be bullish for sure, but unfortunately we are saddled with the volatile here and now in Europe, despite the best efforts of our native Oil and Gas Industry to right the ship. Some interesting things are starting to take shape in terms of short term underlying volatilities so let’s see how they play out in the AlphaVision™ Landscape.
One of my favorite AlphaVision™ for Bloomberg Landscapes (below) is the HV10 less HV30. Simply put this landscape reconciles the previous 10 Day Historical Volatility (HV10) with the previous 30 Day Historical Volatility (HV30) of the underlying. The landscape answers the question is the stock or ETF moving more or less over the last 10 days than the previous 30. In a volatile market environment this is important when you want to manage, say, how many calls you write against an equity portfolio. Also, I like to use this to point a direction at the broader market indexes. Are we cooling down (red) or heating up (green)? Red stocks have the HV10 less than HV30 with dark red names trailing by at least 15 points or more. As you can see below there is a lot of red and this would indicate (and confirm of late) the decline in broader market implied volatilities.
Besides the broad stroke in color, the building height is just 1 week total return for the context of a big move. Note a lot of the accelerating (green) buildings are taller or shorter to indicate extreme movement in either direction. There were only two dark green buildings in the ETF group trading over our soft screen of 15 points or more (remember the breakthrough screening technique with AV is to display above and below screened values to let the data show through). Funny enough they were the AGQ (ProShares Ultra Silver) and ZSL (ProShares Ultra Short Silver). The AGQ was sold down particularly hard (see close up below) showing HV10-HV30 at 30+ points.
From the perspective of any real moves by the big central banks (read inflation) the recent lows for the silver names seem a bit overdone. What you can ride is the accelerating underlying volatilities for more short term contracts in the AGQ (that has more bang for the buck) for a snap back. When you stretch the rubber band they tend to snap and I think the short term implied volatilities in AGQ are no exception.
Authors note: Leveraged ETF’s are volatile underlying securities and traders should use caution and spread type activities when looking at their related option products. Contact your investment advisor before initiating such trades.