VIX - Options Volatility Sonar: Wednesday Recap

by: Erick McKitterick

VIX - Market Sentiment

S&P futures Wednesday were in a very tight trading range, only moving six handles top to bottom. This is expected as there was no major economic news being reported. Tomorrow we get an ECB press conference and around the same time we get U.S. unemployment claims. Combine this with other news coming out of Europe and we could run into a wall of resistance or possibly blow through the vaunted 1350 level in the S&P.

The spot CBOE Volatility Index (VIX) dipped in the first 30 minutes of trading then took a leg up and flagged down the rest of the trading day holding the 18 level into the closing bell. Volatility ETFs (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), Proshares (NYSEARCA:VIXY) and Mid-Term VIX ETF (NYSEARCA:VXZ) finally got somewhat of a payday today as VXX was up more than 2% even in this up tape. This is simply due to the futures of the VIX finally moving to the upside as shown below.


February VIX futures 18.48

March VIX futures 20.50

April VIX futures 22.10


February VIX futures 18.88

March VIX futures 20.80

April VIX futures 22.30

February futures have climbed for an astounding two days in a row now. This is very odd as normally in flat to up tapes the VIX futures would tick down. As stated in yesterday's sonar report (here) the largest plays were call buyers of the March 25 and 24-35 call spread. This could signal some possible resistance here at the 1350 level as people still await a resolution to the Greece problem.

Overall sentiment in the options market when you look at the index funds today was very bearish for such a strong tape. S&P ETF (NYSEARCA:SPY), NasdaqQ (NASDAQ:QQQ) and Russell ETF (NYSEARCA:IWM) all saw bearish flow. Just like yesterday the SPY which traded almost 2 puts for 1 call with more than 51% being bought at or above the ask.

Options Paper

Cisco Systems (NASDAQ:CSCO) reports after the bell today and overall the paper is very bullish. Puts sold on bid more than 50% of the time and calls being gobbled up 51% of the time. The only concern were the largest trades of the day were a buyer of the Jan 17.5 puts for 1.23 possibly hedging against a long term pullback as this name has run more than 33% off its lows. The overall options were more than 5x normal on the call side and net deltas and net premiums are both showing bullish option paper as continued upside is expected by option players. Calls outnumbered puts more than 2:1 in this name today.

Lamar (NASDAQ:LAMR) saw a bull step up today, buying 2.2K of the March 35 calls for .30 against no previous open interest. Today some good sized call spreads were also opened as March 32, 33, and 34 strike calls were all heavily traded. Although calls bought were pretty even with calls sold option volume was more than 20x normal volume as the bulls are stepping up their game in this name. Calls outnumbered puts more than 13:1 in this advertising name.

Casino stocks have been on fire and today again option paper flowed into these names in waves. Melco Crown (MPEL) saw some bulls buy the March 13 calls as well as the February 12 calls light up the option pits. MPEL saw more than 5x normal call volume and 3x normal put volume trade today with calls outnumbering puts almost 5:1. The paper on this name has been very bullish and it appears bulls are ready for the next leg up.

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

Calls outnumbering puts:

Sotheby's (NYSE:BID) 28:1

Emulex (NYSE:ELX) 27:1

Fifth Third Bank (NASDAQ:FITB) 25:1

Noble (NYSE:NE) 24:1

Newell Rubbermaid (NYSE:NWL) 29:1

TECO Energy (NYSE:TE) 37:1

KeyCorp (NYSE:KEY) 36:1

United Therapeutics (NASDAQ:UTHR) 64:1

LeapFrog (NYSE:LF) 21:1

American International (NYSE:AIG) 23:1

BioSante (BPAX) 35:1

Ultrashort Dow ETF (NYSE:DXD) 42:1

Puts outnumbering calls:

Russia ETF (NYSEARCA:RSX) 88:1

LogMein (NASDAQ:LOGM) 35:1

KBW Regional (NYSEARCA:KRE) 35:1

Alliance Resource (NASDAQ:ARLP) 23:1

Parker-Hannifin (NYSE:PH) 11:1

True Religion (NASDAQ:TRLG) 9:1

Georgia Gulf (GGC) 6:1

Rackspace (NYSE:RAX) 5:1

SandRidge (NYSE:SD) 5:1


Dillards (NYSE:DDS) 4:1

Nexen (NXY) 27:1

Volatility Explosion

TripAdvisor (NASDAQ:TRIP) saw a large increase of more than 20% today on decent option volume. On a normal day TRIP only trades 900 calls and 300 puts. Today more than 3,000 calls traded and it appears bulls are again stepping in. 57% of calls were bought at the ask today and net premium is very bullish in this name. March 40 calls and Feb 35 calls were bought today with bulls looking for yet more upside. Calls outnumbered puts almost 4:1 in this online provider name.

Volatility Implosion

OPNET (NASDAQ:OPNT-OLD) and OpenTable (NASDAQ:OPEN) both saw IV collapse today after reporting disappointing numbers. OPNT saw IV drop more than 22% today as those long puts paid off when the stock dropped more than 15% at one point today. Puts outnumbered calls almost 13:1 in this software and modeling provider name. OPEN on the other hand saw option volume scream to the upside with almost 9x calls and 10x puts trading today. The odd part here is the calls were bought on the ask 36% of the time and appears some may look for this to rebound in the upcoming months. Net deltas and net premiums also point to calls being bought and puts being sold which on a day where the stock is trading down more than 10% is very bullish.

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it.



I am short: SIAL, PBI, FXE, DB

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.