Friday, July 24, 2015

Aqumin Volatility Newsletter 07/24/2015 - $XME, $XOP, $XLE, $LNCO

Is inflation dead?

Equity prices are very near all-time highs with the help of financials and technology this week. What is conspicuous by its absence are the commodity names. Oil, natural gas, iron and anything remotely close to those industries are deteriorating at a rate we have not seen in a while.

Below I have arranged the OptionVision™ Landscape by realized volatility. The “parking lots” in the foreground are the big 3 sectors for commodities and the realized volatility is racing up with the names putting 1 week lows. Usually declining prices in rising volatility is a capitulation of sorts. I don’t know when this will end, but these names have been taken to the woodshed and then some with oil hovering in the $50s.


It is true that gold is putting in multi-year lows and all of this has the look of a stampede out of these names. Note that Treasuries have been rising even as the Fed talks up rates. Somebody thinks commodities are dead and leaving in a hurry. I don’t deny the price action, but when I see so much one -sided action in these landscapes it usually does not last forever. The best idea is to own calls and puts in bigger commodity ETFs (XLE, XOP, XME) and trade the deltas as they come.

Disclosure: positions in commodity ETFs.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit