Wednesday, March 28, 2012

Aqumin Volatility Newsletter 03/28/2012 - $AMZN $AAPL $PFE

Window Dressing

Ah, the end of a fat quarter for equities. The naysayers are going to have to re-establish new higher levels to short as most of them got plain run over. The VIX is hanging stubbornly around 15 which I view as the Goldilocks Level, not too hot and not to cold. For the most part April volatility is cheap on a yearly basis as individual equity volatilities are back to or below pre-crisis levels. As the 1st quarter winds down to remind folks that stocks can go higher, I have a nice view to point out.

The view below is just the standard AlphaVision™ Landscape for Bloomberg that shows real time price change and market capitalization. Fat buildings have larger market caps and skinny buildings have smaller ones. The green stocks shown here were up yesterday. Wow it is a big deal, right? Except I get to see all stocks that trade options in real time. I get what is on my Watch List plus the market. On a dead day yesterday where the liquidity was bone dry I did notice some nice market patterns. One, the smaller caps are still showing some strength into the quarter end and two, there were a few big cap names up on the day. These I will call the Window Dressing stocks.

3-28-2012 9-26-11 AM

On a slow day most of these big name gains would be lost under all the bigger gains of the small caps on a downloaded list. This way it is easy to see the pile on toward the quarter end in AMZN, AAPL (big surprise there) and PFE.

For now the Implied Volatilities are relatively cheap in these names and a flyer on some long call spreads into the quarter end might not be a bad idea. All the money sitting on the sidelines in Q1 2012 will have to dress the pig somehow, so take the little cue early on in the week.

Read more from Andrew at Option Pit

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