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

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