VIX - Options Volatility Sonar: Monday Recap

by: Erick McKitterick

VIX - Market Sentiment:

Monday S&P futures moving higher trying for the third day in a row to get above and hold the 1420 mark. The 10 handle move higher went all the way from 1413 touching 1423.90 before selling off. The market quickly sold the good news after the positive numbers out of China just last night. New monthly inflows should have sent us higher today but it appears going into the final hour of trading we will not have a great start to December trading. A check of the NYMO closed with a reading of 51.58 Friday yesterday and should pull back to the 40-45 level after today's trading if we close lower.

The spot CBOE Volatility Index (VIX) began to move higher from the opening bell which should have been a red flag for those who were long the market. Opening at 15.81 it moved lower to just 15.76 before snapping higher to a high of 16.62 or up 4.28% Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) one would think should have moved higher today as well. Unfortunately the gains were limited as front month futures continue to be sold on every pop. The VIX did trade options greater than the average daily volume with more than 600K trading into the final hour. The big option plays today were done in the December call line again selling pressure dominating the pits and more than 2.1M of premium saw sold today.

(Click to enlarge)

Statistics and Screenshot Provided By LiveVol

VIX futures are below.


· December VIX futures 15.58

· January VIX futures 17.15

· February VIX futures 18.35


· December VIX futures 16.08

· January VIX futures 17.45

· February VIX futures 18.63

Options Paper:

Volume again today was pathetic trading just over 10M contracts with only 30 minutes to trade. S&P ETF (NYSEARCA:SPY) as usual lead the way with 1.46M contracts traded followed by The VIX Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL) trading way below the daily average. For those who follow my trades on twitter I did yes short the almighty AAPL Friday and was almost stopped out of the trade in the early morning. I was fortunate enough to keep the trade on and did add a little halfway through the day. The market bulls will now need to step up and hold the market higher here as any weakness here could have us fill gaps lower. As I stated in Friday's sonar report (here), AAPL could quickly retrace to the 571 before making the next move higher. Silver ETF (NYSEARCA:SLV) and Gold ETF (NYSEARCA:GLD) continue to stay strong in this choppy market as we continue to look for direction.

A bullish play came today in the form of a put seller on Rite Aid (NYSE:RAD). I typically do not report on such small cap names but today a large put seller stepped in selling 2,500 January 2014 1 strike puts for .20. This trade stands to make money if RAD stays above the .80 mark before January 2014. This name actually only trades 154 contracts a day so this activity is more than 25x average daily volume. Additionally only 4.1K puts are currently open in terms of contracts so this will add almost 50% open interest to the put side. Calls over the last few trading cycles were also bought. I have no position in this name and do not plan to open one.

Another bullish play came in on a name which was on the sonar last week (here) BRE Properties (NYSE:BRE). Last week I mentioned the 10K January 55 calls which were clearly bought as more than 10.3K were bought on the offer. This was very interesting as this name at the time only had 4.1K total open calls at the time of the trade. Today open interest is north of 14.6K and it appears either the same bull or another new bull is stepping into this name. Another block of 4,750 were bought today for .45 when the spread was again just .30 x .40. This will take the call open interest to almost 19.75K with 18K+ in the January 55 call strike. This has quickly become a very large bet and volatility continues to increase in this name going up another 5.8% today alone. Keep your eye on this stock as someone believes this thing will run somewhere in the next 45-50 days. Calls outnumbered puts by a staggering 60:1 in today's trading session.

(Click to enlarge)

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

Louisiana-Pacific (NYSE:LPX) 2K or 91% OTM calls bought

NYSE Euronext (NYSE:NYX) 74% of calls bought

Boston Scientific (NYSE:BSX) 72%


Symantec (NASDAQ:SYMC) 2.9K calls bought

Akamai (NASDAQ:AKAM) 2.1K

Weatherford (NYSE:WFT) 2.5K - Continued call buying from last week

SanDisk (SNDK) 2K - Chips continue to show strength

Microsoft (NASDAQ:MSFT) 38% - Interesting as large call rolls went off today.

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

South Korea ETF (NYSEARCA:EWY) 96% of puts bought follows puts bought last Friday

Duke Energy (NYSE:DUK) 71%

Tesla (NASDAQ:TSLA) 65%

Coca-Cola (NYSE:KO) 61%

Seagate (NASDAQ:STX) 54% - Put buyers have been paid of late

Teva Pharma (NYSE:TEVA) 48%

MBIA Inc (NYSE:MBI) 44% or 3.1K

Broadcom (BRCM) 43%

Hewlett-Packard (NYSE:HPQ) 36% but 9.45K puts appear to be rolled lower

Live Nation (NYSE:LYV) 2.8K as for the fourth day in a row premium was bought.

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it!

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.


I am short: AAPL, FXE, LYV, RIMM, SPY

I am long straddles: ABC

Trades today: Stopped out of WMB, Added to AAPL short

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.