VIX - Options Volatility Sonar: Thursday Recap

by: Erick McKitterick

VIX - Market Sentiment:

Thursday S&P were ripping higher in the pre-market as U.S. equities attempted to extend the rally from yesterday. Although the initial spike took the markets above the 1419.42 which was the 50 day moving average initially this was met with selling as profit takers of the bounce emerged. Markets continued to chop higher prior to a statement from House Speaker Boehner stating "No substantive progress has been made". The futures reflected this trading down sharply dropping almost 10 handles in a matter of minutes. The NYMO Oscillator closed with a reading yesterday of 41.00 and will more than likely continue higher on today's trading.

The spot CBOE Volatility Index (VIX) had a wild ride today trending down near the 15.00 level before rocketing higher just minutes before Boehner's comments. The oscillator moved higher when just 10 min before the speech more than 50K of the December 19-20 VIX call spread was bought for .10. This initially sent front month futures soaring as there has not been a bid in front month in quite some time. This allowed volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) to move higher just briefly before moving down yet again as the market continued to grind higher into the close. VIX contracts were red hot today with calls being bought bringing in more than 8.4M worth of premium and puts overall being sold down releasing 4.2M.

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Statistics and Screenshot Provided By LiveVol

VIX futures are below.


  • ·December VIX futures 15.55
  • January VIX futures 17.30
  • February VIX futures 18.53


  • December VIX futures 15.40
  • January VIX futures 17.10
  • February VIX futures 18.30

Options Paper:

Volume again today heading into the final hour was again pretty average.

S&P ETF (NYSEARCA:SPY) lead the way with 2.2M contracts followed by VIX, NASDAQ ETF (NASDAQ:QQQ), and Apple (NASDAQ:AAPL) all trading more than 640K contracts each. The big retail paper today was in Facebook (NASDAQ:FB) trading more than 269K contracts. Other big hitters were Microsoft (NASDAQ:MSFT) and Research In Motion (RIMM) both trading almost 250K each. For those who follow my trades on twitter I did enter into a RIMM short today after failing to hold above the 12.00 level. Again both Silver ETF (NYSEARCA:SLV) and Gold ETF (NYSEARCA:GLD) again showed some strength today as call buyers again stepped up sending prices higher.

Some more long term bulls again stepped up today into a little known name Meritor (NYSE:MTOR). Today more than 8.7K of the January 5 strike calls were bought which expire in 2014. This is notable because this name typically only trades 752 calls a day. The stock shot higher by more than 6% as bulls continue to pile into this small cap auto supplier. Total open interest of all strikes and months currently sits just below 13K so this will more than likely nearly double the call open interest tomorrow in his name. Calls outnumbered puts more than 16:1 in this name in today's trading session.

Live Nation (NYSE:LYV) has been a name on the sonar before which worked well to the short side. Today again popped up on my radar after 8K of the January 9 strike puts went off sending premiums to .30. This trade cost the trader north of 250K as a bearish downside bet on the stock. Open interest of this strike already has 4.3K contracts so more than likely this is additional follow through for previous downside plays. Option volume was more than 12x average daily volume with puts outnumbering calls more than 30:1. I followed this trade by buying the January 9 strike puts and selling the front month 8 strike puts for a net debit of .55.

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Statistics and Screenshot Provided By LiveVol

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

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

Goodyear Tire (NYSE:GT) 82%

Arcelor Mittal (NYSE:MT) 81%

TASER (TASR) 66% - Large call blocks going off

US Airways (LCC) 18.1K OTM calls bought on offer. I don't like airlines but paper is bullish

Morgan Stanley (NYSE:MS) 6K OTM calls bought on offer

Dollar General (NYSE:DG) 33K OTM calls bought on offer

Newmont Mining (NYSE:NEM) 47% as calls continue to be the theme

Advanced Micro Devices (NASDAQ:AMD) 6.5K calls for bottom fishing in the name.

Statistics and Screenshot Provided By LiveVol

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

Network Appliance (NASDAQ:NTAP) 70%

Broadcom (BRCM) 3K OTM puts bought on offer

Groupon (NASDAQ:GRPN) 6K puts to play possible pullback

Micron Tech (NASDAQ:MU) 55%

Hertz Global (NYSE:HTZ) 5.4K

Celsion (NASDAQ:CLSN) 48% of 15K puts bought on offer. Huge drop from 8.25 as investors continue to hedge gains

Nexen (NXY) 2.8K

Best Buy (NYSE:BBY) 7K puts trade as retailer continues to falter

Statistics and Screenshot Provided By LiveVol

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it!



I am short: FXE, LYV, RIMM, SPY

I am long straddles: ABC

Trades today: Long RIMM puts, Long MNST calls, Long ABC straddle, Long LYV put diagonal, Long EW calls

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. 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.