Friday, December 20, 2013

Aqumin Volatility Newsletter 12/20/2013 $AAPL $GLD

AAPL skew is on the move

The fact that we are off to the race again today does not surprise me too much. The good GDP number is being accepted by the market as a good thing. That means the Fed bond buying exercise is getting removed from the equation. Good news is good news again as the Fed starts to exit. I would not be surprised to see higher numbers for stocks in 2014 as global growth starts to pick up.

AAPL was up today. After a nice run, the name pulled back a bit yesterday but toward the close I snapped a shot of the upside curve in volatility using OptionVision™. Note the upslope in IV. The paper and liquidity providers started to bend the curve up as AAPL headed down. Was this the sign of a bounce? It was today. Also, note how the downside volatility sagged yesterday. There was never any conviction to yesterday’s selloff.

12-20-2013 2-26-25 PM

AAPL as a big name stock will fit in a money manager’s portfolio better than GLD at the end of the year. Do not be surprised if AAPL finishes very strong near the high for the year. On a pullback, I like the upside butterflies into the parabolic skew.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, December 12, 2013

Aqumin Volatility Newsletter 12/12/2013 $SPY $VIX

The Texas Two-Step

The market took another look over the edge today and decided to walk back from the brink. Whatever the uncertainty of the Taper brings, the reality that the Fed is peeling back because the economy is getting better. And as President Clinton, said “It is the economy, stupid.” Recall that early in the week the bid for the downside was perking up. This was the snap on Monday.

12-12-2013 3-31-21 PM

At this point we posted in our blog on Monday that the small bid in skew should lead to higher volatility. With VIX ringing in over 16% today, it certainly did. By using OptionVision™ traders can glimpse into the pit just like a floor trader. The problem with the VIX is that it does not give the whole story and traders should have a granular look at IV. See below, the other end of the curve is starting to move.

12-12-2013 3-35-16 PM

Note the bid in the upside skew now as the market came off of its bottom. Much like after the Shutdown the market finds its legs again. I think the result will be similar, but the next few days (until Wednesday at 2pm EDT) will be rocky. The upside broken wing butterflies for even or better should work well. Place the long strike at the near term highs.

Positions in SPY, VIX and its equivalents

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Monday, December 9, 2013

Aqumin Volatility Newsletter 12/09/2013 $VIX, $SPY

This could be the big one

Overall today is a quiet day after the big NFP report on Friday. Stocks are still moving in a positive direction with the SPY just .40 or so from an all-time high. That begs the question if it is time for the FOMC to take the punch bowl away from the party?

There is never a good time to say the gig is up to a dependent party, but the Fed has to at some point. If Congress can get a deal done like normal folks, that would go a long way to softening the blow. VIX is up just fractionally today, about .07 which is normal on a Monday with the Weekend Effect.

As you look at the 3D OptionVision™ landscape below, the bid is starting to rise in the downside puts for the SPY. Paper is just starting to nibble again at the thought of the Taper happening in December. This is shaping up for the 1st bond buying pullback by the Fed. If the downside curve continues to expand, that is a sign money is getting more nervous. Note how the downside strikes are just picking up a bit more bid than the ATM strikes below.

12-9-2013 2-49-59 PM

Even with the higher market, the VIX is not making new lows. That is usually a sign IV will not retreat in the very short term at a minimum. If that is the case long volatility positions will work out, at least until Dec 17th, the day before VIX expiration.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, November 22, 2013

Aqumin Volatility Newsletter 11/22/2013 $VIX $DXM $SPX

Barking Dogs

So the big new is that the Dow screamed past 16000 yesterday. Screamed may be a bit too aggressive of a word but that is a new number. I believe the SP 500 will hit 1800 in short order to complete the twofer. In the meantime look at how that has changed the realized volatility in the OptionVision™ landscape below.

Note that most of the stocks have 10 Day HV’s below the 20 Day HV’s. Those would be red to white colored names below on the left side of the black lines I drew. The market for stocks over the last week has been mixed to mostly positive as well. The recent rally has sent the near term realized volatility lower, and that is why we are seeing very low numbers for VIX and other implied volatility indicators.

11-22-2013 9-50-58 AM

Cheap volatility also brings opportunities. Look at a name like DXM. It was a social media marketing darling at one point this year, trading in the 20’s before dropping to the 4 handle. Bull markets tend to give individual names a bit more gas when some good news comes out. To trade a name like DXM, I would look to buy a ratio call spread (sell 1 call and buy 2 OTM) in a farther out cycle for even or better. There should be lots of dogs barking again come the spring. The ratio spread protects in case the dog goes quiet.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, November 15, 2013

Aqumin Volatility Newsletter 11/15/2013 $SPY

A split market

The market is shaking off a few key items:

-A new Fed Chairman that gave nice testimony.

-Uncertainty around or the certainty it is a mess.

-The near 0 inflation in the Euro Zone but small growth is better than negative growth.

All of these things are not enough to lift volatility in the short term. As we go into the close the volatility in the near terms are getting pummeled. IV at the money is dropping as you can see in the OptionVision™ Landscape below. Options centered on the next budget debate are remaining bid.

11-15-2013 12-59-00 PM

Note that the IV is picking up in the months after February. Also note the upside calls are picking up more of a bid than the downside puts. Calls are still bid in the SPY. After seeing this over and over again this year, I will make the same conclusion that we are going higher by year end. The market for volatility just seems to have given up.

The one place where IV does exist is in the volatility futures. That future premium looks like it will decay even if there is a pickup in IV. We will probably see the 11 handle in the VIX next week. Buying OTM put butterflies on short duration in the VXX or similar product should be a good low cost way to ride the softening volatility. That might even finance owning some premium in the “budget debate” terms.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, November 8, 2013

Aqumin Volatility Newsletter 11/08/2013 $SPY

VIX rallies but the puts don't

Looking at the opening the market is a bit weaker (at 9am ET) after a very strong jobs report. The jobless rate is rising a bit as people are trying to get back into the labor force but the economy is creating jobs right though the launch of the healthcare law and the shutdown. That means the long awaited Taper could be here by December. While the market has been climbing in recent weeks, the skew in the index puts have been climbing right along with it.

On a day when the VIX was up, the volatility in the downside puts in the SPY was actually down. How does that happen? The out of the money puts relative to the calls were very bid as traders were hedging by buying downside puts over the last few weeks. Once the market swooned yesterday, they started to get out compressing the puts.

11-8-2013 9-38-13 AMThe at the money options and out of the money calls caught a bit of a bid along with the VIX moving down the index curve. That is the OptionVision™ snapshot below. Now the perception is starting to shift as the market dropped yesterday and the upside calls became more expensive. This is a pattern we have seen over and over this year.

11-8-2013 9-36-19 AM

A trade would be to buy some nearer the money calls and sell more out of the money calls on a ratio and hedge by buying even more out of the money calls. This trade is a broken wing fly and you would look for a slight credit to put it on. When the curve comes in the trade should be unwound or if the market settles at higher prices.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, November 1, 2013

Aqumin Volatility Newsletter 11/01/2013 $SPY

Option volatility is cheap

For the first time in a long time there were no market fireworks after the FOMC minutes announcement. The key thing is that the Fed sees less ominous financial conditions as the pain of the 2008 crash starts to recede in everyone’s memory. While there have been many head fakes since May, the possibility of Tapering is looking very real. It is quite possible the new chairwoman will put her stamp on the Fed and start taking away the punchbowl. The ECB meets next week to discuss the lack of inflation so it is possible that they pick up the mantle of QE once Mr. Bernanke rides off into the sunset. That is a big if as Super Mario likes to keep his powder dry.

What is all this doing to volatility? Note the volatility drop below. The near term IV is coming under more pressure than the far term IV. The ATM expiring in 21 days in 10.43 and that is very close to a single digit. Options are cheap and the contango could get steeper.

11-1-2013 2-12-34 PM

There might be a reason. Stocks are handling the Taper possibility well. T bonds are lower but stocks are only .5% off of all-time highs. We could see some very low short term volatility leading up to the next FOMC meeting. What should work is selling some short term options and buying longer term options. The idea is a variation on the long time spread in any of the big indexes like SPX or RUT. The next round of fiscal bickering will be here sooner than we think and the IV out there should keep up. Short term the silence might be deafening.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, October 25, 2013

Aqumin Volatility Newsletter 10/25/2013 $FSLR

Trading the pop in FSLR

The market is kind of poking along in an upward fashion. With most global news ok there is not a big reason to sell off yet. The gloomy unemployment reports are keeping the hopes of cheap money alive for the short term. On Wednesday afternoon I was running a normal scan with OptionVision™.

I noted FSLR had one of the higher IV’S over realized for the past 60 days. The name also was one of the top performers in tech when the rest of the NASDAQ had been off to the races.

10-25-2013 8-21-09 AM

What surprised me at the time was that the front month volatility in FSLR was pretty elevated. It was near 70% at the money at the time. Earnings are at the end of October and usually the off cycle earnings month declines to a value somewhere around the trailing 30 day historical volatility. 30 day HV was only 44% so the options expiring on Friday were pretty high.

The reason of course was that FSLR made such large two day moves earlier. That kept the IV especially high in the near term. Note below that the IV crashed (red) in that term today even as the IV spiked in the earnings month (green).

10-25-2013 8-19-53 AM

The next time a stock has a nice move up prior to earnings, think about a time spread that buys the earnings month and sells the shorter term month. A day like today would pay big. Close the whole thing prior to earnings.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, October 18, 2013

Aqumin Volatility Newsletter 10/18/2013 $SPY $VIX

The downside skew catches a bid

All that the stock market needed was a return to the status quo. The Fed is still buying debt, the US Government is spending more than they take in and equities fly. Other countries might have worse problems but for now stocks are poised for a giant year.

At the money volatility after 3 days of declines is trading in the single digits. With many of the downside catalysts gone (remember Syria?) the fear of sudden gyration is not at the money anymore. The ATM options are down to 9.99% IV in the Oct 25 cycle for SPY. Last week at this time the IV was near double that.

Yet VIX has found a floor this afternoon after trading much lower. Why? The skew is catching a bid.

10-18-2013 1-52-43 PM

Note on the OptionVision™ landscape how the downside puts are showing higher implied volatility relative to the upside volatilities which have dropped considerably by mid-afternoon. The skew flexing up with the decline in ATM IV should provide some kind of floor for VIX. The big upside, as in the 1% upside moves, should be tougher for a while now that the market does not have a new hole to jump out of.

See Andrew’s 1 hour webinar HERE to follow idea generation using OptionVision.

Alternate link to Video click HERE

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Wednesday, October 9, 2013

Aqumin Volatility Newsletter 10/09/2013 $FB

The Government Shutdown down had brought some pretty wild swings in volatility. One of the easiest ways to see those swings is with the OptionVision™ Option Landscape. I gave a webinar yesterday on using OptionVision™ to help create trades based on skew and specifically the changes an investor can see in OptionVision™. The trade we end up looking at is in FB.

fb upside skew 10082013

See the 1 hour webinar HERE to follow how the idea was generated from start to finish.

Alternate link to Video click HERE

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, October 4, 2013

Aqumin Volatility Newsletter 10/04/2013 $VIX $SPX $SPY

Watching the weekend jump out of the options

The countdown is 13 days away and the big question now is if the two sides can come to an agreement early. So far Congress and the POTUS have pushed negotiations right to the last minute each time. Defunding the government is relatively small potatoes after the Downgrade of 2011 and the Fiscal Cliff of 2012. The arguments are still the same; they revolve around spending more money than we take in. Newt and Bill at least were fighting about how to balance the budget. Our current politicos are miles from there.

What the sentiment saw this morning was more IV. Index volatility rose on the open since another day passed with no news.

10-4-2013 1-53-43 PM

Fast forward 2 hours after the open and some cooperative statements had IV plummeting in the index. This is an OptionVision™ snap of the SPY. If there was any doubt the market is 95% driven by events in Washington DC lately, these 3D charts will corroborate that.

10-4-2013 1-56-03 PM

Recent history says this budget debate will be bitter and to the end. A small drop in IV today is just a stop on the road to October 17th. Buy the juice when you can. Use the drop in volatility to buy VIX call spreads and some VIX OTM puts. The Nov cycle with expire after the debt ceiling date so that is probably the best bet.

The weekend might be out of the options but no budget deal has been inked.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, September 26, 2013

Aqumin Volatility Newsletter 09/26/2013 $VIX $SPY

Shifting Sands

Just ahead of the continuing resolution the market is doing a little flim-flam. Basically traders are trying to handicap the budget process and starting to place bets accordingly. In a big index ETF like the SPY that starts to shift the skew around while liquidity providers deal with the different market forces.

If you look at the OptionVision™ Landscape, the real action is in the downside puts expiring Oct 4th. Note that the implied volatility is kicking up a bit more there. The Sep 27 term (far left) shows higher IV since it is expiring tomorrow and that is normal. The Sep 30 Quarterlies show some downside curve expansion since they expire on Monday. The ITM puts you ignore for market width (those are the tall green buildings up front) variation that gums up the Implied Volatility calculation.

9-26-2013 10-41-56 AM

That leaves the two nearest October terms. Paper looks like it is running for protection but just a bit so far. That makes sense given the fluidity of the budget talks. Watch to see if the expansion in skew continues pushing up the VIX today. At least from current pricing VIX is not really moving from ATM as much OTM.

The trade would be to buy some ATM options in the SPY and finance with more OTM puts in the nearer Oct cycle. Keep the trade contract neutral. I would wait until the last minute on Friday.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, September 20, 2013

Aqumin Volatility Newsletter 9/20/2013 - $SPY

Will this upside skew ever die?

It is kind of a quiet day as we wind toward the end of the week and my thoughts are wandering to what will happen next. The Fed is pumping again so my question is do we go higher or lower? The stock market is not giving back too much today. The only thing really getting slammed is the front term IV in the indexes, especially at the money.

The OptionVision™ 3D chart here is very helpful for that. Note the large wasteland in the middle yesterday. That is implied volatility imploding ATM. The more interesting thing is where it is not imploding. Look at the upside call skew. That is still bid just a bit. That is a sign the upside skew is getting closer to the ATM implied volatility.

9-20-2013 11-36-36 AM

This is usually a sign that the market is expecting to go up since there is an absence of call sellers. They simple have not come back in yet. The curve has looked like this for at least two weeks and so far has been right. Through Syria, the FOMC and whatever else is going on the market is still looking at upside.

Hard to believe but that is what the skew says for now.

Look at upside ratio call spreads in the SPY for even or small credits on shorter duration like in the Oct 4 Weekly cycle. I expect we go higher just not as fast as the last two weeks.


OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, September 13, 2013

Aqumin Volatility Newsletter 09/13/2013 $VIX

Vol of Vol getting whacked

The market is continuing its rally this week into the FOMC meeting on Wednesday. What I find odd is there is no solution in Syria, no confirmation on QE and Congress is about to get into Cage Match III with the POTUS on the next round of budget talks. And we continue to rally. That is confidence.

The bond market is lingering near the bottom with not a lot of movement today. The only real movement is in the VVIX, or volatility of the VIX. I have VVIX down 1.54 today but a good picture is in my OptionVision™ landscape. Paper is pounding the Sep 15 puts on pretty heavy volume. The big spike is just heavy volume on lower IV.

9-13-2013 2-09-15 PM

What does that mean? Well the market thinks the VIX is not going to drop a lot going into expiration on Wednesday morning. Considering there is still $.60 of premium in the VIX futures paper is betting IV catches a bid into Wednesday. I think that is perfectly reasonable since the weekend is still in the options.

The market is expecting higher IV so we might as well wait for it. You could buy a nearer term ATM straddle in the SPY on Monday morning or buy a VIX Oct 15 level put on Tuesday before the close. From there see where the prices take either trade. There is a lot of confidence out there in stocks but I bet we see some higher IV in the very short term.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, September 6, 2013

Aqumin Volatility Newsletter 09/06/2013 $VIX $SPY


Market still a bit jittery over Syria

The relatively predictable drop in VIX after the NFP today did not catch too many people by surprise. The real surprise was that it started to happen yesterday.

Note the change in implied volatility on the close Thursday in the OptionVision™ Landscape below. Pretty much all down the curve IV drifted lower. For the last several NFP reports that have been “taper sensitive” IV continued to stay bid well into the announcement. Not so this time, and the market might finally began seeing the writing on the wall going forward.

9-6-2013 1-57-45 PM

Note the action by midday. The second piece of overhanging news is still the situation in Syria. Usually when there is a cloud hanging over the market things move to a standstill. The market hates uncertainty and the little snippet that Putin was going to continue deliveries to his old pal Assad sent the market into a tail spin. The statement was later clarified but it gave the market a 1% in about 5 minutes.

9-6-2013 2-00-45 PM

This screen shot (above) is showing a little jump in downside skew for the SPY. As one piece of news comes out the market is still extremely sensitive to what goes on in Syria and we might not see any real movement until that resolves.

The IV should stay elevated until there is a resolution. A way to trade that would be a diagonal call spread OTM in the big indexes. The SPY is probably best since it is the most “stuck”. The market is going to sit around for a while but there will probably be one more panic in the meantime.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, August 30, 2013

Aqumin Volatility Newsletter 08/30/2013 $SPY

Whither the Skew

While the administration decides what to do about Syria most of the economy seems to be humming along at a steady if unspectacular rate. But whenever there is saber rattling going on in the Middle East that seems to take a front seat to the slightly improving underlying conditions. You don’t need to go past the IV changes in the SPY to see that.

In the OptionVision™ landscape I have implied volatility change in the SPY. Note how the IV increased (green) yesterday pretty much in every strike in the index. This effectively put the decay back into the options prior to the weekend. No doubt this was from the possibility of action in Syria. Take note how the rise in IV occurred on the close. The more ATM options saw IV increase more than the OTM put options. The market for volatility moved from a panic type set up to one of just plain moving.

8-30-2013 9-23-11 AM

Implied volatility can increase and the skew can flatten like it did on Thursday. That usually means the market is aligning for a rally, or at least not a crash, since the bid for downside protection subsides. There are still too many moving parts with respect to the Middle East so maybe it is better to trade this a little wider. Maybe a SPY OTM strangle swap selling next week’s term (Sep 06) and buying the following weeks term (Sep13) should pick up the decay that the market put back yesterday. An ATM time spread that works with a 1% move up or down in those terms might work as well. While there could be action this weekend, it seems like getting the coalition together might take more than 3 days. That is what the current change in skew says anyway.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Wednesday, August 21, 2013

Aqumin Volatility Newsletter 08/21/2013 $K

Very Unusual Activity

While the market sits on its hands waiting for the Fed I thought I would bring up some unusual activity that I picked up in the OptionVision™ Relative Volume landscape yesterday.

Note here that the activity is in a normally quiet name Kellogg (K). It trades some but the strike activity was at 5x normal volume in the Jan 57.5 calls and 2x normal on most of the other strikes. This snap shows huge volume. The Relative Volume calculation divides the Average Daily Volume (ADV) by the number of active strikes. That adds up to a whole lot of activity as total ADV hit 45,000+ contracts yesterday. Also note that the IV change for the most part is all red. That means in a stock like K which moves about 60 cents a day paper crushed the IV (implied volatility) on all the paper sold.

8-21-2013 12-17-50 PM

Now that was very interesting since the day saw mostly higher IV in other names. The reality was a computer malfunction that sent dozens of orders cascading into the system and the contracts executed in 1000 lot sizes at a $1. It is very easy to see relative activity in the 3d environment. We’ll see if those trades will get busted or not.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, August 16, 2013

Aqumin Volatility Newsletter 08/16/2013 $GDXJ

Roaring Gold

Equities are going to finish with a tough week. The specter of Egyptian unrest, higher interest rates and the Fed tapering was enough to pull stocks from their lofty highs. I will say the reasons for the last two mean that the economy is getting better which should be good in the long run. In the short term the market has sold off 3-4% on the Tapering Boogeyman, so the selloff is not a total surprise.

What did not sell off this week were Gold and the Gold Miners. The metal and the peripheral stocks had a big run which most traders are attributing to short covering. The headline inflation came in at the number at that was enough to scare the gold shorts into covering. That also drove the IV up. Looking at the realized volatility landscape notice the Metal and Mining stocks. Gold miners dominated the front of the pack on size and speed of move relative to the market.

8-16-2013 12-54-28 PM

I am not calling the near term top in gold, but watching markets move like this when money piles in so fast, the move is usually hard to sustain. Look at the small cap miner ETF, GDXJ. The IV is coming in a bit today all across the upside of the curve which means some profit taking in options.

8-16-2013 12-51-16 PM

The whiff of inflation does not inflation make. Judging from Treasury bond prices, the market is not looking for lower rates and is expecting some kind of reduction in Fed buying. That should hurt gold in the short term but I would not short it. A trade that could work is a ratio call spread that would buy just OTM calls and sell a few extra OTM calls farther up the curve. The spread should return a small credit if gold stops or produce a decent return if there is some more run.

Be careful of the margin requirements of any extra short calls.

I have positions in gold.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Tuesday, August 6, 2013

Aqumin Volatility Report 08/06/2013 $VIX

VIX skew getting a little lift

The market is falling off today mostly as a result of the chatter on the “taper talk”. With economic data improving, the reason for the Fed to become a bigger holder of debt is looking less and less like a necessary idea. From a volatility point of view, how is the market starting to absorb the fact that the easy money days are soon to be over? The answer to that is the upside in VIX is starting to pick up.

Market volatility is near the year lows so it was hard for it to get much cheaper. VIX below 12 printed only a couple of time this year. Volatility generally responds to an impending move by making skew jump up a bit. We are starting to see that this morning. Note the upside calls in the VIX are picking up some volatility as shown in my OptionVision™ landscape. The OTM options are picking up volatility faster than the ATM options. This is just a little caution creeping into the market.

8-6-2013 11-27-21 AM

The interesting thing is most of the IV blip is concentrated in the two near term option months. The volatility is reacting in the short term, but there is almost no activity in the 3rd month. If the rise in IV starts to fade it would make sense to buy a VIX strangle around the 13/14 strikes for a $1.00. If VIX prints like it did yesterday below 12 the intrinsic value of the strangle would be at least $1 so there is low risk. If the market starts to really fall on the taper talks VIX is back to 16 in a hurry.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, July 26, 2013

Aqumin Volatility Newsletter 07/26/2013 $FB $FDML

Two big movers

Today we have another sleepy day moving into the weekend. As I write this VIX Is up about .18 to 13.15 but probably will not be there for long with the volatility futures hovering just up for the day. As catalysts go, the consumer confidence number hit a 6 year high and that did not do much to push the market into higher territory. My closet theory is the US budget talk is coming again and there has been a solid two year history now of how destabilizing that patter can be. The current back and forth is not what I would call a bullish conversation. The market in 2013 has weathered the payroll tax hike and spending cuts in, well, record fashion. That should make the Keynesians go back to their drawing boards. The broad market stuff just does not look that interesting right now. Fun will be had in the individual names for the balance of the summer, and a couple of moves were really off the charts.

The funny thing is that they could not be in more different industries. Facebook (FB) and Federal Mogul (FDML) both had the biggest upside gaps this week in the consumer discretionary sector. Facebook is rolling in some bucks from a fast shift to mobile devices and FDML is selling lots of stuff for cars. The 20% up moves are a bit of a surprise as none of that was priced into the option before earnings.

7-26-2013 2-06-01 PM

From an option trading point of view there is not much to FDML. The markets really are too wide to get anything done but the earnings power is a good sign for the automobile industry as a whole. FB is a bit of a different animal. The big issue was always if FB could keep subscribers and monetized the 1 billion users. This is the 3rd report in a row where the actual is starting to match the hype. You can use the upside skew to get long for small dollars. I like a wide strike butterfly like the Sep 34/39/44 for just over $1 or adjust to a slightly ITM fly with very wide strikes. If one of the oldest industries and newest industry can report blowout numbers, things are probably not that bad.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, July 19, 2013

Aqumin Volatility Newsletter 07/19/2013 $SPY

Wither the VIX

The market for volatility seems to be giving up its final breaths today. If underwhelming earnings in GOOG and MSFT cannot push things lower I am running out of things to think of. The Fed has backtracked sufficiently enough and the world seems resigned to the fact that Europe will be a socialist basket case for a while during the public/private sector reshuffle with Portugal the latest problem. Detroit files for bankruptcy here maybe pushing up the Treasuries a bit. The net result this afternoon is a market down fractionally and the VIX down into the 12 handle at 12.91. What gives?

The OptionVision™ screen shows the total crush in the upside options. With the market shaking off pretty much all the bad news today the Weekend Effect is kicking in. That means upside options in the big indexes can be had on the cheap.

7-19-2013 2-43-55 PM

As things get cheaper, my inclination is to buy. My inclination is also that nothing seems to stop this market, but being a lifelong skeptic means I want an out just in case. For a midterm trade in the Aug cycle I would look at ratio call spreads (long more options than short) in the Aug cycle that reduce decay but give a nice pop if the market moves either way. If bad earnings make us flat this week what might good earnings do next week?


OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, July 11, 2013

Aqumin Volatility Newsletter 07/11/2013 $MTL

Cold Steel

The Fed minutes gave one message yesterday and then Big Ben seems to deliver another one after the close. The message is that easy money will be around and that the QE portion could end. Even with the market rallying today I don’t see how those messages were all that different from several weeks ago. Interpretation is in the eye of the beholder. A trader uses OptionVision™ to interpret the available data and it is a little easier than deciphering Fed speak.

When I look at activity it is mostly there to generate trade ideas. Basically, what is trading and does it look interesting to put on a position? Looking at relative volume numbers just shows when options are trading out of the ordinary. Below is a case in point in a Russian steel maker, MTL. The spike shows there was huge volume on declining volatility in the MTL Jan 2014 3 calls. That usually means paper is selling some options and in this case 15,000+ contracts. The trade was probably a buy write.

7-11-2013 10-30-52 AM

But from a trade point of view the yield on the buy write looks pretty good. The options traded 45 versus stock around 2.75 and represent a decent return on risk. The steel industry is in the basement so the call writer is adding a layer of protection at relatively high volatility levels. As a way to play a recovery in the emerging markets, this is not a bad way to start.


OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, June 28, 2013

Aqumin Volatility Newsletter 06/28/2013 $SPY

The Weekend Effect is coming early

As the market prepares next week for a slew of economic data, there is one thing on the calendar that is a known quantity. That is the fact that next week trading will get curtailed by a day and a half. So liquidity providers have to stuff 3.5 trading days into 7 total (including the weekend) calendar days. I think they have started early.

If you look at this OptionVision™ snap from the close Thursday, the cycle expiring on July 5th has had the volatility knocked out of it more than its Weekly cousins. By taking down the implied volatility the liquidity providers effectively take out some of the decay of the options. They can only do this of course if there are no buyers on balance. And that is the surprise really, since the economic numbers have been providing pretty good activity of late.

6-28-2013 3-49-47 PM

I still think the market has plenty of move left in it now that the thought Q Easing is going to slowly chip away the value of the Bernanke put. Buying premium into the weekend or Monday will only have a fraction of normal theta. A trader in a sense gets some time for free. The idea of a trade would be to buy near dated straddles at this reduced rate and see where the market takes us. I am pretty confident it won’t be SPY 161.


OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Wednesday, June 19, 2013

Aqumin Volatility Newsletter, 6/19/2013 $SPY

Ben brought boring back into play

Since the QE program started, every Fed meeting has been met with a combination of shock and awe. Most of the shock going into the IV before the announcement and a lot of the awe is the sound traders make looking at the market with their mouths open waiting for news. I cannot blame anyone for waiting as we were doing ourselves. Normally, we try to position some sort of long gamma, which we did at the last minute, with some short volatility, which we avoided for the most part. The reason being this was a strange FOMC reading according to the IV changes throughout the day.

At the start of the day the VIX was headed up to just above 17% and is typical before any big announcements. You can see that in the OptionVision™ Landscape below, and notice how the near term IV expiring Friday and next week got bid up. The outer months just caught a slight bid.

6-19-2013 3-50-15 PMOptionVision at 1008 ET

But after a couple of hours something strange happened. Note how the 3D landscape “disappeared” as all the back month IV took a dive. The bid in the front two terms remained, albeit a bit less, but the bid had left most of the term structure. Also note how the upper end of the OTM call strikes got more of a bid. It was like the news had seeped out already.

6-19-2013 3-54-11 PMOptionVision at 1142 ET

As I write this the VIX is down .18 to 16.43 and the market is down around 1.25% giving back much of the gains this week. The market parsed the Bernanke tea leaves and decided he is leaving himself room to exit even though he said thresholds were not triggers. With 10 year yields raising the market is driving a truck through that hole. From the intraday volatility action someone seems to have figured that out already. While we sold off it was not a disaster and that is what the flow bet on. Ultimately economic growth is good and while we won’t have 8% up quarters anymore the disaster scenario is getting farther away.

I like the Iron Condor type trade in the big indexes since Big Ben has put boring back in play.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, June 13, 2013

Aqumin Volatility Newsletter 06/13/2013 - $SPY

The Orderly Decline of the Market

The last few days are if anything a sign that all good things must come to an end. The market has now gone from the proposition the Fed will stop buying paper to the realization that the Fed is going to stop buying paper. The BOJ is declaring success and no need for further stimulus as the debt there got to 140% of GDP. Lucky for them it is domestically held. A big part of our rally, at least I thought, was the semblance of some fiscal order in the US after the Fiscal Cliff tax hikes and the dreaded Sequester. The market flew all the while knowing the Fed would taper when the unemployment picture got better. My thought here is that the lack of budget talk by Congress after the results of lower spending and higher taxes has knocked 500 billion off the deficit is removing what was a positive catalyst. Anytime the market sees clarity it rallies and when things get murky we selloff. The two big pins of deficit reduction and low rates are unsettling folks. Is it a panic selloff?

Below is the OptionVision™ Landscape with the SPY using just a change in IV on the close Wednesday. Ignore the first term because it expires in two days. The rest of the market for volatility is moving in a very uniform way. This happens when the market slowly sells off and the index creeps down skew curve. Note how there is no increase in the OTM puts strikes. If anything, the upside calls are catching more of a bid as the skew flattens there but overall a uniform selloff.

6-13-2013 11-50-04 AM

Is this a sign of the bottom short term?  Nope. It is not a sign of a panic either. The market for volatility is going up because it is supposed to. The market is taking a breather as it gives back most of the 1600 and above level since the two good reasons for being there are going away. Take the volatility where it is and look at a downside and upside butterfly in the SPY with about 6 strikes apart. Let the market go to where it is going to go.


OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, June 7, 2013

Aqumin Volatility Newsletter 06/07/2013 $VXX

The vol of vol goes lower

There was a lot of touchiness this week waiting for the NFP. As it turns out the number was ok, even with the unemployment rate making a small uptick. Stocks caught a bid and are starting the slow grind back of possibly regaining some of the highs we saw just a couple of weeks ago. What is hard to believe is that VIX hit 18.6 yesterday early in the morning and it is now trading 15.49. That is a more than 3 point drop from the highs. It also says a lot about near term implied volatility.

Looking at the VXX in OptionVision™ this afternoon. Note how the red Option Landscape is even redder in the downside puts. Usually puts trade cheap in the VXX because they are not the panic securities, the calls are. The put holders today had to get out as the VXX traded from 21 to just 19 this morning. VXX holds the front two month VIX futures so activity in here is a good proxy for future volatility.

6-7-2013 1-46-32 PM

Right now, the market for the volatility of volatility got smoked. Usually I take that to mean there will be less volatility going forward at least in the short term. Generally VXX has a problem with decay which puts pressure on the product and now with big news like the NFP out, there will be even more pressure here. The liquidity providers took down the IV because they expect more option selling so don’t be surprised if you see lower levels in the VXX over the next week.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, May 23, 2013

Aqumin Volatility Newsletter 05/23/2013 $TLT

The Fed Speaks

Ben Bernanke testified before Congress yesterday and said things were not too bad but could be better. He thought that both sides getting together to simplify the tax code would be great. One can still hope. The bigger news is that the Fed could stop buying bonds if the job outlook improves so they are waiting. Waiting generally means movement should slow down. No real surprise there since that is what they have said for a while. The market liked it in the morning and did not like it in the afternoon as 3 weeks of buying came to an end. Add a slowdown in China and we are down ¾% in the morning. I am using OptionVision™ to look at how the bonds, via the TLT, reacted to the Fed news by the close yesterday.

5-23-2013 11-38-18 AM

By the end of the day the market had bid up the volatility in the TLT pretty solidly. Notice that some of the upside caught an extra bid. The mid-June ATM IV in the TLT is around 14% which is right at 6 month highs. Today’s downdraft might make TLT interesting again but after beating around for the morning session bonds did not move much, so the flight to quality action is dimmed. That is usually a sign the IV should start to drift back to lower levels. I think a controlled short premium trade, Iron Condor type, in the July cycle would work and close when the IV gets to 11.5%. The Fed said they are waiting for jobs data which means bonds should keep going sideways in a range for a while.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, May 16, 2013

Aqumin Volatility Newsletter 05/16/2013 $GOOG

Does a volatility pop tell a story?

With the VIX up .05 to 12.86 as I write this, the market is taking a long overdue breather. For the last two weeks through good news and bad, stocks have rallied pretty hard. For instance AAPL has moved a lot but really has gone nowhere. I think the big winner has been GOOG running from around $800 to just over $900 in a two week span. Let take a look at the volatility in there.

On May 3rd the upside skew in GOOG was pointed down in the May 24 Weekly options. I had the ATM volatility around 20% and the 50 point OTM volatility around 17%. We call this a steeper upside curve as opposed to flat since the OTM options are trading for cheaper price pointing the curve down.

Now we fast forward to this morning and as you see below in my OptionVision™ landscape, the upside calls are pricing a bit higher than the ATM. It is not a lot but remember, those options last week were 3 volatility points the other way and at $65 per volatility point that is a big swing. Note this morning as GOOG tanked I snapped this picture of the upside skew. The OTM calls got real bid as some investors looked for a bounce (dark green).

5-16-2013 2-51-14 PM

By late in the afternoon the IV change went from about 3 points on the upside to only 1.5 points. The difference in the shades of green denote a 10% change versus a 15% change in IV. I think this says the quick bounce buyers hoped for got disappointed and the rally faded out of the IV.

5-16-2013 2-54-46 PM

The GOOG IV is no longer a bargain but the upside skew is still pretty expensive given the steep curve it usually trades at. When the cool comes out of the upside, look for the rest of the IV to follow.

Normally I would say 1 x 2 upside call spreads for credits (buy 1 selling 2) but the margin is prohibitive (and risky!) in GOOG. You might try an upside broken wing fly (May 31 cycle) for close to no money and a protective put just in case we get a brush back. These positions have been working well lately. If you own GOOG, out of the money calls have usually not been this expensive and it would make a nice sale against a long stock position.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Tuesday, May 7, 2013

Aqumin Volatility Newsletter 05/07/2013 $TLT

Bernanke Wins!

We have the market flirting with all-time highs again today and investors should be beginning to wonder if the financial crisis is over. Asia looks ok, India ok, Latin America ok and the US recovering but in a pokey big government way. Europe is still a basket case but that is mostly due to the reluctance of a good chunk of the population to work for a living and for the governments to stop paying for it. At least short term the Euro should stay intact while the drudgery of budget discipline starts to happen. While I won’t declare the financial crisis dead there is plenty of anecdotal evidence for that. TARP was a success, Fannie and Freddie could pay back what they owe and home mortgage payments are now cheaper than rents in many places. Take a look at the risk management tool of the last 4 years and see what is up with that.

I will use the TLT as a proxy for US Government Bonds and short term implied volatility (IV) is making year lows. Below in the OptionVision™ Landscape, May IV at the money is trading 9.7%. That is the low for the year. Note how the IV is dropping all down the term structure as well. Not as much as the smack down in the front two weeks but still coming in nonetheless.

5-7-2013 1-55-20 PM

Near term IV is the fastest way to gauge the markets potential movement, and right now options say that is not very much. The volatility market at least is saying the big down move we just saw will start to slow to a trickle. Not much is going to change on the part of the Fed and the volatility traders are starting to believe it. If you follow the logic that the financial crisis is easing somewhat, owning a cheap downside butterfly in Jun would work the best. Something like the Jun 120/117/114 strikes and just let the TLT drift lower. The panic premium should drift out of the TLT but really only slowly.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, May 2, 2013

Aqumin Volatility Newsletter–5/2/2013 $VIX, $SPY, $VXX

So how is the VIX going up?

With the underwhelming ADP report, the private sector is just limping along and improving only slightly. At some point here now that stocks are near all-time highs the residual of the financial crisis can only propel things for so long. I mean that as earnings have climbed back up over the last 4 years, stocks have had just fits and starts. 2012 was nice but 2011 was a wash as investors worried about the Euro. Now what is powering stocks are lower interest rates globally. For some reason that is not enough to jumpstart hiring by companies. My only guess at this point is the continuing government dysfunction is worrying job creators both here and in Europe, but that of course is just speculation. What is a little more transparent is what is up with index volatility.

Here is an OptionVision™ snap of SPY volatility changing at around 3pm ET yesterday. The first column is the calls the second is the puts. Very ITM puts will be in the lower right of each column. What you note at the 159 strike I have marked is how light the ATM and OTM put volatility change is today. We have a decent sell off but the skew on the downside is not really going anywhere fast. If anything the skew on the upside in the near term is starting to flatten a bit (OTM IV calls move closer to ATM IV). The market is down and volatility goes up but it is hardly accelerating.

5-2-2013 8-47-35 AM

Click HERE for a short video with more details on trading in the current market.

I think after NFP, as has been the case over the last 6 months, the IV rally we just had will dissipate a bit. If the skew was kicking up more on this weak report I would worry more but for now the market thinks the new highs don’t look too bad. Considering where the rally has come from we could end up beating around here for a while. More of the same from the Fed could mean just more of same.

The Trade

Normally I would look at a VXX put, but buying an OTM VXX put time spread makes more sense. There is only about .57 in future premium so the decline would be slow coming. The more aggressive of you might look at closer Iron Condors using next week’s Weeklys in the SPY.


OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, April 26, 2013

Aqumin Volatility Newsletter 04/26/2013 $SPY, $VIX

Is the market giving conflicting signals?

Looking at the rally Thursday, on what I would say is so-so news, I am reminded of the fact that over the last year most of the melting has been to the upside. The market has tended to take off like a shot with Fed easing and the BOJ declaring war on interest rates. The US market with a decent dividend yield is starting to look attractive all of a sudden. While I am still mild bullish, it pays to take a look at how the market is viewing volatility in the near term.

The 10 day volatility in the SPY is 18.5%. That takes into account the Boston bombing tragedy, but the market still had plenty of near 1% moves since then. What we have had is a market marching back up and the realized volatility has stayed firm. Note in the OptionVision™ Landscape below that most of the front month VIX options yesterday (when they opened) were slightly higher in the near term.

4-26-2013 11-14-51 AM

Implied volatility was increasing all across the board too, going into the close on Thursday. Those are the green option series below.

4-26-2013 11-16-03 AM

Normally I see this and then I think the open will be a bit weaker. This morning we opened down around .4% and it looks like we are treading water most of the day. The key is the action of Thursday. If the volatility gets bid into the close, that usually is a sign of a weaker tomorrow.

With the VIX still bid this afternoon this might be a good case of selling some premium into the weekend. Maybe an ATM time spread in the SPY in the first two weekly terms. I think the realized volatility holds up the back month and we should see the weekend wash out by Monday.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, April 18, 2013

Aqumin Volatility Newsletter 04/18/2013 - $SPY, $GOOG, $MSFT

Where is the Panic?

I am in Chicago this week and it has been raining cats and dogs since I got here. Rainy Chicago is kind of gloomy and that is an apt descriptor for the stock market this week. We started off with the Boston Bombing and the market has not been right since. The blog last week actually saw some upside skew flattening coming back into the market, but of course there was no way to predict what happened (although we did hedge a bit by picking a ratio spread and betting more on the gamma). The question now, is it just gloom or panic as we tick down to new lows for the week?

I have the OptionVision™ Relative Volume Landscape up and I have to say the action is underwhelming. Besides some of the IV leaking out in the near term from yesterday there is very little activity out of the ordinary. As a matter of fact we are downright inactive. The only activity that is slightly higher is in the May puts just out of the money (OTM). The volatility is only a hair up. That feels like more put sellers that own puts looking to exit. The IV is only up fractionally given we are down 1 (.7%) points in the SPY.

4-18-2013 3-05-53 PM

The market feels more gloomy than panicky and the volume seems to support that. A big part of the action could come to fruition after the earnings from GOOG and MSFT (web and desktop) tonight. I think this would be a better time to sell the recent pop in IV by moving away from the ATM. Think more like an Iron Condor. That way the trade is manageable on the off chance the gloom turns to panic.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, April 12, 2013

Aqumin Volatility Newsletter 04/11/2013 - $SPY

The Skew climbs the wall of worry

Thursday was another record for the SPY. If you listen to the folks on TV, each person on camera is trying to pick a top or look for another reason for the market to crack. That well may be as some kind of selloff is inevitable. This morning the market looks about down .5% so maybe the pundits will have their day. Looking at the trade on the close yesterday I saw a slight change in the SPY skew. That is telling a different story.

What we are looking at with OptionVision™ is a landscape of all the option chains in the SPY with the columns that are months. The curve for volatility is the height of each little building. Color is for implied volatility change (Green up/Red Down). Yesterday in what seems like a week of rallying, where were the changes in volatility located? The OTM call strikes are in the lower left of the landscape. The IV was climbing there. Note the red declines in IV on the downside puts in the outer months. This is the skew in the index giving way. The CBOE Skew index notched a recent low yesterday.

4-12-2013 8-46-32 AM

What I found more interesting was the lift (albeit small) of the OTM call implied volatility. This means one of two things:

1. Paper is not selling upside anymore and the liquidity providers are flattening the upside.

2. Paper is buying OTM calls.

I think it is a little of each. As an ex-SPX trader, flattening upside usually came with more of a rally as I wanted to get ahead of the buying. The problem with 9% call volatility is that there are less call sellers. If there is some on-balance upside buying that is a good sign our rally is going to keep going. At least short term we have a floor in the index implied volatility and might actually see it increase if we get more of the same action. With this potential I like the idea of ratio calls spreads (buy 2 sell 1) 6 weeks in duration or more using OTM calls with a 3 week hold maximum. If the pundits are right you keep the small credit and if this liquidity fueled rally keeps pumping the upside skew and the index the trade will do just fine.

To see the end of day skew change, surf over to the CBOE’s website below and check out the curve shift in the VIX, SPX, OEX and DJX.


The Options Institute at CBOE is partnering with Aqumin and ORATS to bring you CBOE 3D using OptionVision™ technology to display proprietary Option Data provided by ORATS. By offering you an end of day "snapshot" of the day's biggest index moves, you are "getting the whole picture on market activity at a glance. Using 3D visualization, you will get daily implied volatility reports by series and expiration on SPX, OEX, DJX and VIX with data provided by ORATS. All reports are available to you for download in a pdf format.

CBOE 3D Daily Volatility Activity Reports:


VIX Volatility Report

SPX Volatility Report

OEX Volatility Report

DJX Volatility Report

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Wednesday, April 3, 2013

Aqumin Volatility Newsletter 04/03/2013 - $ZNGA

Hold‘em with ZNGA

As I sit watching the market sell off a little bit I am reminded that stocks are just a game of numbers. We get good numbers and we rally and we get mediocre numbers and we tank. The jobs number was not great this morning and we tanked. Most of the jobs numbers have just been ok anyway so I guess it was time for a miss. The fact that we are getting closer to what the new health care bill has in store for employers is probably not helping. The number missed and we sold off. So when a stock does not sell off into a broad market decline I notice.

Take ZNGA today. The name has been a poster child for everything wrong with a public social media company. Yet it is still here. I have followed it for most of the year and got real interested in it when it started trading for the cash + property value of the company in mid-November. It got real interesting when some states started to allow certain forms of internet gambling and ZNGA already had a presence in the non-cash space. ZNGA started to take cash bets in Great Britain today. That could start moving to the USA relatively fast. The good thing for ZNGA is they are not tainted by the 15 years or so of offshore online gambling business. They come in clean with the latest technology.

Looking at how the volume is dispersed on my OptionVision™ landscape, most of the trade centered around the May 3.5 calls. The Apr cycle actually had some volatility go down. The May calls are the cycle that contains the earnings announcement and will have a little more room to run should the online gambling thesis keep working.

4-3-2013 3-52-24 PM

I think the volume is looking for more upside in this name and not just on the short pop we got this morning. ZNGA traded as high as $4 with just the potential of moving into cash gaming 3 weeks ago so I don’t think that is a stretch. It looks like a lot of paper sees it that way to. I like the idea of selling OTM put spreads in here in the May or Jun cycle. I don’t think the transformation will be over night and the higher IV is nice to collect while the company puts it all together.

I have a position in ZNGA.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Thursday, March 28, 2013

Aqumin Volatility Newsletter 03/28/2013 - $FB

No one likes Facebook juice

The remarkable thing about FB as a name is it is barely in the news anymore. The lock ups are going away and the stock has become, well, very boring. It is as if the initial hype was so big that the investment bankers just want it to slowly go away until the magic number comes back into view. That number is the IPO price which the name was approaching in early part of the year 2013. The 100 billion dollar valuation is a ways away right now and it won’t be hitting it anytime soon. That does not mean it won’t be an interesting trade between now and whenever it gets back to the IPO price of $38.

Yesterday FB was one of the few bigger cap tech names showing some real strength. The stock has been on a recent slide from $31 and change and started changing course yesterday. The momentum view below shows FB trading stronger than the other big cap (those are big blocks) names in the tech sector in AlphaVision™ for Bloomberg. You just connect AlphaVision™ to the Excel API in Bloomberg.

3-28-2013 10-51-54 AM

Yesterday FB looked like it wanted to run. But today looking at the options all of the action has cooled somewhat. I have the near term volatility dying in April as you can see below in the OptionVision™ landscape. The move we had yesterday is slowly drifting away, and with it the implied volatility in the options.

3-28-2013 10-57-36 AM

If you note the height of the buildings above, the implied volatility is much higher in the earnings cycle coming at the end of April. The Apr option implied volatility is getting to near 52 week lows and is the best way to play a little rally back to earnings. We saw a little smoke yesterday as FB rebounded and here is a chance to grab some options for better prices.

AlphaVision™ data from Bloomberg

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, March 22, 2013

Aqumin Volatility Newsletter 03/22/2013 - $EGO

EGO is looking at a bottom

As I sit around this Friday waiting for some news to come out of Europe to move my volatility positions, I can’t help but think how many people even know where Cyprus is? A country with less than 1 million people in the middle of Mediterranean Sea can move the US Treasury market. That is the state of our global economy. It is the latest in the saga of European Debt soap opera now entering its 4th season. So when the broader market picture gets murky I like looking at other names that have something going on in them. Here is an OptionVision™ snapshot of EGO.

Eldorado Gold Corp. looks a lot like most of the miners lately. Namely they are trading at 52 week lows. EGO makes some cash, but all of these names seem like they are in the way of an exodus of money from gold mining stocks. This might be due to the fact that the expected inflation from the Fed’s bond buying program has not materialized yet and gold has gone nowhere. The goldbugs are in hibernation for now. One thing that has materialized in EGO is a buyer of calls. And like I noticed last week the fact that customers are buying options is telling.

3-22-2013 3-19-31 PM

A customer is buying 10s of thousands of EGO Jul 10 calls. The fact they are buying these options in and of itself is important because capital is being spent on a sustained upswing. Like the index calls I saw last week the paper is thinking rally between here and the summer. I am seeing more and more of this kind of activity even into the weakness generated by the Cyprus issues. Paper is looking past the current problems into the golden future beyond. I have to agree with them. Just buying a July ATM call spread in here should work.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

Friday, March 15, 2013

Aqumin Volatility Newsletter 03/15/2013 - $SPY

The volatility is showing the way today…

Well after a record setting week, I am reminded of a period in the early 90’s. Not so much the “irrational exuberance” of Mr. Greenspan but more of 1993-1994. We raised taxes and got serious about addressing the budget which is starting to feel like 2013. The hot stocks at the time were biotechs and right now we have 3D printing companies and social media. Old Tech is limping along. Banks and Oil and Gas are doing fine thanks to the closing of the financial crisis and the domestic production boom. And just like 1994, there was little participation by the public because 1987 was still stuck in everyone’s head. I am not saying the public will miss the rally but the public is missing the rally now. In short there is plenty of room for stocks if the trajectory of the budget continues to come into focus, namely lower deficits and sustainable spending. How does the market view the records and near records this week? Lower implied volatility is the answer.

If you look at the mid-morning snapshot of IV in the SPY using OptionVision™ note the gentle contango starting to take shape. The near term gamma intensive options are starting to fade in IV and the longer term volatilities are starting to perk up just a bit. Note the downside of the near term Weeklys in the SPY. Those options are finally starting to break down. Much of the weekend decay came out yesterday in option prices, so the IV really looks to be fading here into the weekend.

3-15-2013 11-56-32 AM

Stocks tend to like the contango in option volatility. That makes everyone feel normal. At least for the end of this week the market looks like it will head to higher prices at a slower pace. No doubt that will give investors a chance to jump in before it is too late.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit