VIX - Options Volatility Sonar: Thursday Recap

by: Erick McKitterick

VIX - Market Sentiment:

Thursday S&P futures continued to initially push higher heading into the open. The ADP payroll number came out printing an expansion of 215K jobs versus an expectation of just 134K. The futures did pop on this news but quickly retreated after unemployment claims, 16K higher than expected. All of this with the markets trying to digest the massive 75 handle move in the S&P. To put this into perspective the S&P has not had a 2 day move in the futures this big since the flash crash of 2011. A check on the NYMO currently is sitting at +39 and should move into the 20s after today's trading session.

Today the spot CBOE Volatility Index (VIX) continued to fall back to the low 14s in today's trading session. The oscillator did recover somewhat after the Federal Reserve minutes put a negative tone to the markets after the 2:00 release. Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) traded in lock step with the futures and no major deviations were noted. Additionally the large VXX put spreads noted in the sonar report yesterday (here) continued. Interesting to note today were large buyers of the January 30 calls buying more than 2M in premium total. This almost perfectly mimics the VIX contracts where 6.2M in calls were bought and 1.5M in puts were also bought.

Statistics and Screenshot Provided By LiveVol

VIX futures are below.


· January VIX futures 15.60

· February VIX futures 16.73

· March VIX futures 18.13


· January VIX futures 15.65

· February VIX futures 16.88

· March VIX futures 18.05

Options Paper:

The market slid today some .2% but this did not stop the options market from posting almost an 18M contract day. Just like yesterday, the leaders in option volume were S&P ETF (NYSEARCA:SPY), ^SPX, ^VIX, and Apple (NASDAQ:AAPL). Bank of America (NYSE:BAC) was replaced with Russell ETF (NYSEARCA:IWM) for the 5th spot accounting for 5.4M of the 18M contracts on the day. Ford (NYSE:F), Gold ETF (NYSEARCA:GLD), NASDAQ (NASDAQ:QQQ), and Emerging Markets ETF (NYSEARCA:EEM) also had decent volume today.

United Parcel Service (NYSE:UPS) saw a bull step up today buying more than 13.3K of the July 77.5 calls. This caused premiums in the July calls to spike from 2.65 all the way to 2.91 before the buying was done. Current open interest in this name is just 3,731 contracts so I expect this to be north of 10K contracts tomorrow. Net premium was also crazy bullish with puts being sold on the bid 47% of the time and calls being bought on the ask 60% of the time to the tune of 2.7M. UPS has pushed higher on very heavy volume the last two days and it appears one bull thinks it is going north of 80 prior to July expiration. Options volume was almost 3x average daily volume with calls outnumbering puts 3 to 1. I'm going to confirm via open interest tomorrow, but I will consider getting into this trade moving forward.

Statistics and Screenshot Provided By LiveVol

Popular ETFs and equity names with bullish / bearish paper:

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

Applied Materials (NASDAQ:AMAT) 5.1K OTM calls

DirecTV (NYSE:DTV) 75% of 6.6 OTM calls bought on offer

DryShips (NASDAQ:DRYS) 68% as bottom feeders looking for rebound.


Michael Kors (NYSE:KORS) 51%

Knight Capital Group (NYSE:KCG) 2.2K OTM calls bought on offer. Not sure I follow the action here as I thought deal was done.

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

Interactive Brokers (NASDAQ:IBKR) 99% - Looks like closing of bullish position need to confirm through OI

Constellation (NYSE:STZ) 81%

Delta Air Lines (NYSE:DAL) 65%

Cognizant (NASDAQ:CTSH) 64%

Zipcar (ZIP) 2.3K OTM puts bought - Inc ase deal falls through

Blackstone (NYSE:BX) 3.4K OTM puts bought

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it!



I am short: BWLD, FSLR, FXE, LYV, SPY

Trades today: None (Crying over BWLD, FSLR, and LYV shorts)

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.