VIX - Options Volatility Sonar: Monday Recap

by: Erick McKitterick

VIX - Market Sentiment:

Monday S&P futures again moved up more than 10 handles in the pre-market. Fed chairman Bernanke spoke today at 8:00 EST which lifted the futures into the open. US economic pending home sales again missed expectations; the markets continued to shrug off the news moving again to the upside.

The spot CBOE Volatility Index (.VIX) initially fell but climbed as the markets continued to push higher holding around the 15.00 level. Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) all traded as one would expect today down as the VIX futures continued to slide. It is important to note the spot VIX does continue to trend slightly higher after some larger SPX puts went off today protecting against potential corrections. VIX Futures are listed below.


April VIX futures 17.28

May VIX futures 20.35

June VIX futures 22.30


April VIX futures 15.85

May VIX futures 18.70

June VIX futures 20.73

Options Paper:

Micron Technology (NASDAQ:MU) today saw some massive plays to the upside. The April 10 calls were bought some 90K times for .05 in a single block trade. Additional the May 10 calls and July 11 calls were also bought 65K and 40K times in single block transactions. This activity appears to be very bullish and then when you combine the put activity this is where it gets extremely interesting. There were more than 36K puts which traded today and 26K or 71% were sold on the bid. This included the selling the June and May 8 puts more than 22K times. These trades appear someone may want to get long MU in a big way in the upcoming months. Today call volume was more than 12x average daily volume with 75% of calls being bought on the ask. Calls outnumbered puts more than 6:1 on the day.

Corning (NYSE:GLW) today saw a large long term bull step in buying the January 2014 20 calls. These calls traded more than 45K times today against open interest of just 8.2K. Option volume in this name was more than 3x average daily volume in this name with puts being sold and calls being bought overall. GLW has been a huge underperformer but it appears at least one bull believes this stock could return to glory over the next 2 years. Calls outnumbered puts almost 11:1 on the trading day.

Apple (NASDAQ:AAPL) again today saw some heavy bulls step up as heavy inflows into OTM calls came rushing in. Today the front month april options were very active as calls barely outnumbered puts. However, the calls overall were being bought on the ask where puts were being sold showing a very bullish sentiment as people continue to bet on this name charging yet higher. Net premiums today confirmed these numbers with more than 32M of inflows coming into the calls and 3.3M outflows in the puts helped to drive IV back down. Option volume although not extreme did outpace average daily volume today trading more than 787K contracts in all.

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

Calls outnumbering Puts:

US Dollar ETF (NYSEARCA:UUP) 116:1 (Sept 22 calls heavy today)

Phillip Morris (NYSE:PM) 41:1 (Dividend steal no play here)

Office Depot (NYSE:ODP) 23:1

Williams Companies (NYSE:WMB) 21:1

Cablevision (NYSE:CVC) 18:1

Puts outnumbering Calls:

WisdomTree India (NYSEARCA:EPI) 115:1 (Large blocks of April 18 puts appear bought)

Traverlers (NYSE:TRV) 26:1

Texas Industries (NYSE:TXI) 23:1

Dunkin Brands (NASDAQ:DNKN) 14:1

Forest Oil (NYSE:FST) 10;:1


Waste Management (NYSE:WM) 6:1

Atmel (NASDAQ:ATML) 5:1

Volatility Explosion:

ProShares Short-Term VIX Futures ETF (NYSEARCA:VIXY) today saw IV shoot to the upside more than 14% points. Today calls were being bought on the ask more than 41% of the time as well as puts bought more than 40% of the time. This helped to push IV higher as people continue to bet both long and short this name. Although this is far from institutional bets as it relates to the fund option volume was more than 2.5x average daily volume trading over 2.7K contracts. Calls outnumbered puts 1.6:1 and were the top 11 trades of the day.

Volatility Implosion:

Lions Gate (NYSE:LGF) hit 2 days in a row now on the IV implosion front. IV fell another large 18% points today after weekend box office sales of the "Hunger Games" blockbuster surpassed estimates. Interesting paper today was what appeared to be a buyer of the April 25 straddle for 10.20 1K times. This bet would profit if LGF ended April below 14.80 or above 35.20. This is strange as this appears to be a very large premium to make a non-directional bet which would lose big time if LGF continued to push higher. LGF again traded more than 11x average daily volume with calls outnumbering puts 2.3:1

As always, happy trading and stay hedged. Remember equity insurance always looks expensive until you need it!

Disclosure: I am long APC, TBT, FAZ, KERX, MBI, GLW, MU. I am short: PBI, DB, AAPL, LYV, YHOO, BBY I own strangles: