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