VIX - Options Volatility Sonar: Tuesday Recap

by: Erick McKitterick

VIX - Market Sentiment:

Tuesday S&P futures lifted across the board as the market melt-up continues. The market crossed 1370 again but unlike yesterday we were able to hold above the 1370 and 13K level on the DJI. The major averages are now headed for the best close since 1998.

The spot CBOE Volatility Index (VIX) lifted somewhat today as some continue to hedge against a potential correction. Volatility ETF's (NYSEARCA:VXX) and 2x volatility (NASDAQ:TVIX) were down as futures traded down as the continued market strength continues. VIX futures are listed below


  • March VIX futures 21.33
  • April VIX futures 24.30
  • May VIX futures 25.90


  • March VIX futures 20.93
  • April VIX futures 24.05
  • May VIX futures 25.68

Today the Ultrashort Treasury ETF (NYSEARCA:TBT) and Long Treasury (NYSEARCA:TLT) finally agreed with this rally. Much of the strength came at the expense of the US Dollar as the ETF (NYSEARCA:UUP) reversed today trading inversely to the Euro ETF (NYSEARCA:FXE). Overall options activity was again very slow with just over 13.1M contracts trading going into the close with Apple (NASDAQ:AAPL) again moving more than 800K of these contracts.

Options Paper:

First Solar (NASDAQ:FSLR) reports after the bell tonight and as noted on the sonar report yesterday the paper remains very bearish. The put spread owners put in an incredible 2.2M on the 39-32 put spread and today the paper remained bearish with overall calls being sold and puts being bought. Today 22 min before the close a large put spread buyer of the weekly 36-33 put spread was bought more than 3K times with the 36 puts trading above the ask and the 33 puts trading below the bid. This appears to continue the pattern of bearish paper so earnings will more than likely make this stock move hard. I stated yesterday I was going to try to get back into this trade on the short side but was unable to get a fill. FSLR was halted going into after hours trading.

Popular ETFs and equity names with bullish / bearish paper in terms of call / put ratios:

Calls outnumbering Puts:

Rite Aid (NYSE:RAD) 214:1
Ariba (NASDAQ:ARBA) 170:1
Goodrich (NYSE:GR) 128:1
Rockwell Collins (NYSE:COL) 118:1
SLM Corp (NYSE:SLM) 98:1
Boise (NYSE:BZ) 38:1
Fifth Third (NASDAQ:FITB) 35:1
Nexen (NXY) 24:1
Emulex (NYSE:ELX) 18:1

Puts outnumbering Calls:

Marriott Vacations (NYSE:VAC) 3935:1 (Yes 3935 puts to only 1 call)
Live Nation (NYSE:LYV) 31:1
Two Harbors (NYSE:TWO) 31:1
DeVry (NYSE:DV) 11:1
Western Union (NYSE:WU) 9:1
Red Hat (NYSE:RHT) 8:1
Sealed Air (NYSE:SEE) 8:1
BMC Software (NASDAQ:BMC) 7:1
Chelsea (NASDAQ:CHTP) 6:1
Japanese Yen ETF (NYSEARCA:FXY) 5:1
Carnival (NYSE:CCL) 4:1 (Heavy put buying theme over last 5 trading days)

Volatility Explosion:

Ultrashort Silver ETF (NYSEARCA:ZSL) saw implied volatility continue to rise as the ETF has been taken to the absolute woodshed of late. ZSL has been a favorite of mine to do a synthetic long position during silver price pullbacks but here we are getting insane price action as it relates to silver. Today the calls continue to be sold on the bid 45% of the time but the largest call purchases offset this as some January 2014 18-20 call stupid buyer came in apparently buying long both strikes. The May 9 calls were also popular today but overall calls outnumbered puts more than 5:1 on the trading day.

Volatility Implosion:

Priceline (NASDAQ:PCLN) saw implied volatility imploded cut by more than 28% today after reporting a fantastic quarter. Today interesting though as the net premiums showed largest trades out of the money bought both calls and puts. This is somewhat expected as long shareholders can hedge at this point with puts now trading with IV near the 52 week low of 26.60. Regardless straddles could be great plays here for people as price movement and or IV increase could be a good move.

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it!


I am long SDS, APC, TBT, PCLN

I am short: PBI, FXE, DB, EEM, AAPL, LYV,
I Own Straddles:

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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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