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VIX - Market Sentiment:

Tuesday S&P futures faded slightly lower as markets around the world continued to react to the massive rally last week. News out of Europe was light but negative Factory orders and Unemployment did put a slight negative tone to futures. S&P futures traded in another 10 handle range moving from 1446 to a high of 1456 in Tuesday's trading session. The NYMO yesterday closed at +40 and remember overbought readings do not occur until we hit a level of +80.

Today the spot CBOE Volatility Index (VIX) popped back up above 14 as the market traded down fractionally yet again Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) traded lower along with front month futures as contango continues to pound these ETF's. Interesting action today was large call and put buying in the VXX sent volatility higher throughout the day.


(Click to enlarge)

Statistics and Screenshot Provided By LiveVol

VIX futures are below.

Yesterday

  • January VIX futures 14.90

  • February VIX futures 16.68

  • March VIX futures 18.03

Today

  • January VIX futures 14.60

  • February VIX futures 16.63

  • March VIX futures 18.10

Options Paper:

The market continued to weaken Tuesday and options volume showed it clear as day with only 12M contracts trading heading into the final 30 minutes of trading. The leaders in option volume were S&P 500 ETF (NYSEARCA:SPY), Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), Facebook (NASDAQ:FB), and Netflix (NASDAQ:NFLX).

For those who follow me and my trades on Twitter know I followed a large bearish trader in 3D Systems (NYSE:DDD). Yesterday a large buyer of the May 45-35 put spread stepped in to the tune of 1M in net premium. Today the buying continued as large buyers of puts across the board came into the market. This was confirmed with the move higher in volatility across the board. DDD has had a massive move and it appears one trader is willing to step up and put down a significant bet the high flyer will pull back prior to May expiration. Options activity was more than 5x average daily volume with puts outnumbering calls almost 1.8 to 1.


(Click to enlarge)

Statistics and Screenshot Provided By LiveVol

Bearish paper did show up today in the form of a stock I have been painfully short of, First Solar (NASDAQ:FSLR). The biggest action today was not the net premium when it comes to FSLR but instead the outright shift in options sentiment. Today of the 16K calls which traded 47% were sold on the bid. This also is shown with the puts being bought 49% of the time to the tune of some 8.7K contracts. One single 200K buy order came in today for the March 27 puts, sending premiums higher throughout the session. Options activity was just around average with puts slightly outnumbering calls. I almost stopped out of my position last week but with today's option activity, I will look to press this short even further.

Popular ETF's and equity names with bullish / bearish paper:

Bullish Option Flows - ISE & % OTM calls bought on offer

  • Hasbro (NASDAQ:HAS) 89% of OTM calls bought on offer

  • AOL Inc (NYSE:AOL) 76%

  • Medtronic (NYSE:MDT) 58%

  • FLIR Systems (NASDAQ:FLIR) 2.1K call rolls

  • Sherwin-Williams (NYSE:SHW) 42% of 8.2K calls bought

Bearish Option Flows - ISE & % OTM puts bought on offer

  • Alighn Tech (NASDAQ:ALGN) 80% of 3.2K puts bought

  • Nike (NYSE:NKE) 4.1K OTM puts bought

  • Financial ETF (NYSEARCA:XLF) 65% of the 247K contracts were OTM puts

  • SandRidge Energy (NYSE:SD) 48%

  • Unitedhealth (NYSE:UNH) 3.7K puts bought on offer

As always, happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it!

Disclosure:

I am long: AGNC, APC, KERX, KOS, MTGE, NRG, PG, PSX, SWKS, VHC

I am short: BWLD, DDD, FSLR, FXE, LYV, NFLX, SPY

Trades today: Bought NRG calls, Bought SWKS calls, Bought DDD puts

Aside from these, I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. I do not recommend that anyone act upon any investment information without first consulting an investment professional as to the suitability of such investments for his or her specific situation.

Source: VIX - Options Volatility Sonar: Tuesday Recap