VIX - Options Volatility Sonar: Wednesday Recap

by: Erick McKitterick

VIX - Market Sentiment

Wednesday S&P futures continued to drift lower after poor durable goods numbers released today. S&P futures traded in a 20 handle range today. Topping out around 1412 before the sellers came in and buyers stepped up around the 1392 level. The 10-day moving average for the S&P ETF (NYSEARCA:SPY) now sits at 140.45 as a close below this could be short term bearish if it occurs over multiple days.

The spot CBOE Volatility Index (VIX) exploded to the upside yesterday rising more than 10%. Today the VIX had a more muted response rising fractionally. Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX) and alternative 2x ETF (NYSEARCA:UVXY) were trading up along with futures heading toward the close. Yesterday's large move in VIX futures had some running for cover but volatility sellers stepped in yet again today. Futures pricing is listed below.


April VIX futures 17.43

May VIX futures 19.48

June VIX futures 21.35


April VIX futures 17.58

May VIX futures 19.70

June VIX futures 21.35

Options Paper

Apple (NASDAQ:AAPL) continues to dominate options trading as more than 6.5% of all options traded today were AAPL. Flows today were more bearish than days past with net premiums signaling inflows to puts were almost 5x inflows into calls. Regardless it appears people continue to bet on both upside and downside moves in this name which has caused IV to again move to the upside 4.8% higher than yesterday. The largest trade today was a buyer of the January 2014 600 straddle for 224.70 some 1,150 times. Keep an eye on open interest to see if this was a closing transaction. Calls outnumbered puts 1.5:1 today.

Pitney Bowes (NYSE:PBI) is a name I have been short on for quite some time following some large put orders. Today again the bears are trying to lean on this name as the May 16 puts and July 15 puts were being bought in droves. Put volume was more than 7x average daily volume with 59% of the puts being bought at the ask. Some 10K of the May and 5K of the July puts traded today again increasing IV in this name. I still hold the 17 puts in PBI from January and continue to take reduced losses through selling diagonal spreads in this name but are losses nonetheless. Puts outnumbered calls almost 10:1 in this name today.

So I'm switching up my call to put ratio section and replacing it with a suggestion I was given by a reader. Today I'm now going to report on bearish/bullish paper where out of the money options were sold on the ask which typically shows bullish or bearish trends. Please feel free to leave feedback if you like the new format. It seems a bit easier for those who just want an overview of bullish or bearish paper.

Popular ETFs and equity names with bullish/bearish paper:

Bullish Out of the Money Calls Bought On Ask:

Penn Virginia (NYSE:PVR) 99%

Sony (NYSE:SNE) 91%

Infinera (NASDAQ:INFN) 86%

Zoltek (NASDAQ:ZOLT) 66%

Jaguar Mining (NYSE:JAG) 52%

Patriot Coal (PCX) 50%

Hertz (NYSE:HTZ) 43%

Kerx (NASDAQ:KERX) 36%

Arch Coal (ACI) 32%

VXX 29% (Huge call volume today)

Research in Motion (RIMM) 28% (Again upside call buyers continue to step in. I am short)

Bearish Out of the Money Puts Bought On Ask:

GenOn (NYSE:GEN) 99%

Arch Coal 51%

CBS Corp (NYSE:CBS) 54%

AK Steel (NYSE:AKS) 48%

Transocean (NYSE:RIG) 36%

Dell (NASDAQ:DELL) 33%

Research in Motion 30% (I've been short on RIMM into earnings following this)

Volatility Explosion

MBIA (NYSE:MBI) is a name I jumped into on the sonar last week and today this name ripped higher on heavy volume. Today bulls continued to pile into this name, buying the April and May calls. Many continue to spread these trades so if you look at the percentage bought on the ask of only 33% it is not overwhelming. However, the puts continue to overall be sold as open interest in the calls continue to shoot way above normal. I did take some profits in MBI today as one should on a move like this but I do plan to add on dips. Calls outnumbered puts more than 4:1 on more than 2x average daily volume.

Volatility Implosion

Jos A Bank (NASDAQ:JOSB) reported disappointing results today before the market open and IV along with the stock price was crushed. In the options market one trade stuck out like a sore thumb when a single block of 10K April 50 calls traded today. Interesting as the bid ask at the time was 2.05 x 2.30 today and the single block went off for 2.15 so a definite buy or sell signal is a hard tell. However, typically for a stock which only trades 102 calls a day a 10K buy order would typically send option premiums through the roof so more than likely was probably a call seller against long equity shares. Overall calls outnumbered puts 4:1 on the day on more than 68x average daily volume.

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it.




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.

About this article:

Tagged: , Options, SA Submit
Problem with this article? Please tell us. Disagree with this article? .