Tuesday, October 18, 2016

Aqumin Volatility Newsletter 10-18-2016 $CHK

Someone CHK the Gas

There are finally some decent earnings to cheer about today.  Both GS and NFLX are up big on beating estimates.  For stocks that are at near all-time highs, great earnings are necessary to propel us higher.  Oil and Gas are doing better than ok this year to help Technology keep things moving.  The Energy group has been the big winner in 2016 with outstanding performance after a dismal start.  Energy lead by CHK has turned in the best relative performance so far this year (AlphaVision®Landscape group on the lower left) in the S&P 500.

CHK is a story from a famous ex-CEO to over production just in time for the crash in Nat Gas prices.  The $40 company is now a $6 company.  At some point they will be an asset play for someone with a very long view.  The Trend Reversal Landscape is showing a lot of red lately in the Energy group.  The poor 5 day relative performance is probably the group taking a pause after the big move to $50 in oil.  CHK clearly is not resting since 3 month performance (tallest building) is the best in the group and it is still rallying short term (green color).

On top of the recent performance there is a lot of call buying activity in CHK.  The near term volatility is bid sky high with the terms expiring prior to earnings.  Long ratio call spreads could work in here in the short term (buying 2 and selling 1).  Maybe the long winter for Nat Gas is over if the producers keep picking up a bid.

Read more from Andrew at Option Pit

Monday, October 10, 2016

Aqumin Volatility Newsletter 10-10-16 $WMT $TSN

WMT the high volatility leader

The market is having a hard time discounting the future.  By that I mean that the Fed and their multiple announcements and opinions by various Fed Governor’s have put a fork in market volatility.  The big sea change is that G7 Central Banks are holding so much paper that players are having a hard time looking forward.  Not that it ever was easy in the modern era, but now it seems different. As a volatility watcher I will ignore the squishy middle for now and look at some outliers.  WMT fits for this week.

We have the rolling volatility landscape that looks at 4 realized vol measurements at once.  60 day through 10 day realized vol is depicted as a sequence of buildings with “up buildins that are green showing sequential jumps in from 60 day to 30 day to 20 day to 10 day realized.  Usually that means some equity is in some kind of trouble short term.  In this case WMT got the double whammy of lower earnings expectations and a non-settlement with the DOJ.  Both of those sent the stock down to 6 month lows on gaping moves for WMT.

The AlphaVision® Vol Changes landscape shows color as the 10 and 20 day IV ratio so greener buildings mean more volatility now.  TSN is also high on the list for the S&P 500.  This reminds of December when WMT went through some initiatives that knocked down the price to the high 50s.  I don’t think it gets there but some put time spreads just OTM might work to sell the shorter term volatility.  WMT did get a little worse before it got better.

Read more from Andrew at Option Pit