VIX - Options Volatility Sonar: Thursday Recap

by: Erick McKitterick

VIX - Market Sentiment:

Thursday, S&P futures again rose after numbers out of China ignited futures trading up 6 handles. China reported a suprising 31.6B in Trade Balance versus just 20.1B expected. In addition U.S. wholesale inventories jumped .6% a key component of GDP calculation. Our daily check on the NYMO shows yesterday closed with a reading of +42 again, but still nowhere near the +80 to indicate overbought.

Today, the spot CBOE Volatility Index (VIX) again trended lower as the market continued to grind higher. Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) continued to price lower as front month futures continue to price in full complacency as any pop continues to be sold. Heavy resistance should come into play at the 1475 level but if VIX futures are telling us anything there is little to no risk being priced currently to the downside.

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Statistics and Screenshot Provided By LiveVol

VIX futures are below.


  • January VIX futures 14.83
  • February VIX futures 16.55
  • March VIX futures 18.03


  • January VIX futures 14.35
  • February VIX futures 16.23
  • March VIX futures 17.78

Options Paper:

Options volume was just above average today trading 16.1M contracts traded going into the final 30 minutes of trading. As usual the typical names lead the options volume with S&P ETF (NYSEARCA:SPY), Bank of America (NYSE:BAC), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), leading options activity. Interesting today was the inclusion of Abbott Labs (NYSE:ABT) who saw massive call activity. This is an exact repeat of what I described in yesterday's sonar report (here)with Banco Santander (NYSE:SAN). This is nothing more than a dividend steal from market makers used to make a quick buck and is overall delta neutral.

Again for those who follow me and my trades on Twitter, know I noted continued put buying in AAPL. Today it was less clear than others as net premiums of both calls and puts continued to push implied volatility up almost 3%. Additionally today Russell 2000 ETF (NYSEARCA:IWM) saw a massive unbalanced March 85-80-75 put fly go off buying the 85 and 75 puts 50K times each and selling the 80 strike puts 150K times. Net of the trade protects the trader from a drop in the IWM to the 80.00 level between now and March expiration. The trader would take substantial losses if IWM dropped below 80 so at least this bank roll sees no more than a 10% decline between now and March expiration.

(Click to enlarge)

Statistics and Screenshot Provided By LiveVol

Popular ETFs and equity names with bullish/bearish paper:

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

CBS Corp (NYSE:CBS) Almost 1.2M in calls bought for March 40 expiraiton

AngloGold (NYSE:AU) 84% - Heavy call buying in gold miners continues

GT Solar (GTAT) 80% as 8K OTM calls bought

Phillips 66 (NYSE:PSX) 49% as bulls just won't give up in this name

Starwood Hotels (HOT) 49% of 4.3K OTM calls bought

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

Frontier Communications (NYSE:FTR) 5K of the Jan 4 strike puts bought possible buy to close check OI tomorrow.

Perfect World (NASDAQ:PWRD) 91% OTM puts bought

CA Inc (NASDAQ:CA) 5.3K OTM puts bought on offer

Pitney Bowes (NYSE:PBI) 84% - Wish I would have shorted the pop

Pandora (NYSE:P) 2.2K OTM calls bought on offer

Disclosure: I am long AGNC, APC, KERX, KOS, MTGE, NRG, PG, PSX, SWKS, VHC, and I am short BWLD, DDD, FSLR, FXE, LYV, NFLX, SPY.

Trades today: Added to FSLR short

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.