Wednesday, May 9, 2012

Aqumin Volatility Newsletter 05/09/2012 $AVP, $DF

Putting Lipstick on the Pig

I am officially deciding the Euro fiscal problems are a permanent part of the equity markets in the USA. While the USA will no doubt have similar problems if the government fails to act at some point, you would not know it from the strength in Treasury Bonds. The new volatility is nerve racking for equity holders but great for traders, especially if you have a nice way to keep track of the movement intraday. The buy near the open and sell near the close has held out now 3 days in a row. The Euro Banks sell in their session, crushing the USA markets, go home and the sellers leave lifting the broader indexes here. Take a look at the landscape below.

5-9-2012 12-17-25 PM

This is the AV for Bloomberg VWAP Landscape. Buildings that are up on the day are trading ahead of WVAP. When they are red (still down on the day) or green (up on the day) that tells the traders the relative position. The muted white color is very near even so as of this afternoon things look a bit mixed to weak, but not as bad as this morning. The fact that most of the S&P 500 was trading much higher midday than in the morning means the pattern is keeping up. (This landscape was all below the horizon at around 10am ET this morning.)

Some of the bigger names in Health Care and Consumer Staples did not bounce back. I have AVP (Avon Products) highlighted because the deal seems to be back on. The dark green color means that the name is trading strongly near the highs of the day. If Coty is raising money maybe a higher bid is in the works. An option trade that may work is something like a short time spread in the just OTM puts. If you can collect a nice enough premium before the cash buyout you can buy some new lipstick or man cologne for that special someone.

Read more from Andrew at Option Pit

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