Aqumin Volatility Newsletter 9-1-16 $DUST $VIX

Aqumin Volatility Newsletter 9-1-16 $DUST $VIX

Where will the DUST settle?

The historic lows in realized volatility are surprising this year given the crazy volatility we saw in the first 6 months.  If I told you in February that 10 Day Realized Volatility would be down in the single digits for 30+ days, you would have thought I was crazy.  Yet here we sit. Even with the NFP number, VIX can barely get above 13.5%.  Not all products are taking a rest right now.

Note the action yesterday in DUST.  DUST just reverse split after a one way trip to the dog house in 2016.  The product is the inverse Gold Miner (3x) ETF so good day for DUST is a bad day for the gold miners.  It is not a product I trade normally.  3x leverage has problems day to day, but the leveraged ETFs are a great signal for volatility in a sector in general.  The screenshot is just showing relative movement grouped by the most volatile, popular ETFs traded on the CBOE.  My snap was on the close yesterday.

DUST is continuing the climb this morning and could keep going.  I like long gamma (owning near term calls and puts) in the gold miners since for whatever reason, the miners care about the NFP number tomorrow.  The massive gain in the Gold Miners this year could get messy.

Positions in GDX and GDXJ

Data from the Bloomberg Terminal

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Aqumin Volatility Newsletter 8-28-15 $SPX $BTU

Smoking Volatility

As Friday rolls to a close stocks have seen some near record levels of volatility. If the VIX could have opened early Monday morning we would have touched 80% on that crazy downward spike. Notice there is no Financial Crisis currently. The funny thing is that was almost cheap. Traders know that when things get out of hand the most valuable commodity is gamma. Having some would have helped a whole lot on Monday.

On a volatile week the Metals and Mining groups showed the highest IV. Note that in the OptionVision™ Implied Volatility (IV) landscape, Mtls and Mining show the highest average IV over the 60 day realized volatility. The meltdown in China basically left that segment in tatters and it only is just recovering or trying to. The IV still remains high as the future is totally murky. This sets up more potential movement than normal.

When IV is this much of a premium over realized volatility that usually means the market has imploded, yet we are back to the levels we were at on Friday for SPX. The ground is still very shaky. If anything at this point I would still buy Gamma near the money and sell some Vega out of the money, We could buy ratio call spreads (buy 2 sell 1) with the long calls near the money. Any positive ratio that brings a credit in the some of the Mtl/Miners seems reasonable. If the recovery continues they should pay. BTU has been in the news recently and would not make a bad candidate for this kind of move. Other miners look ok in the space and might do as well if Coal looks too scary,

OptionVision™ – data from ORATS

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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

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