VIX - Options Volatility Sonar: Monday Recap

by: Erick McKitterick

VIX - Market Sentiment:

It's Monday again. Just like the movie Groundhog Day the accelerated uptrend continued with S&P futures pressured early, trading down more than 11 handles before recovering right after the open. We crossed the 1370 level in trading as we continue to eat through every resistance level in the SPX. However we gave up Dow 13K and SPX 1370 as we entered the close with a slight spike in the VIX.

The spot CBOE Volatility Index (VIX) spiked hard over 19 when an an initial rush for S&P puts came in hard but was subsided early as we rallied throughout the day. Volatility ETF's (NYSEARCA:VXX) and 2x volatility (NASDAQ:TVIX) were up big earlier with VIX futures popping at the open but then trading down only to recover slightly into the close. VIX futures are listed below


  • March VIX futures 21.00
  • April VIX futures 23.98
  • May VIX futures 25.35


  • March VIX futures 21.33
  • April VIX futures 24.30
  • May VIX futures 25.90

The biggest thing on my radar today was the lack of Ultrashort Treasury ETF (NYSEARCA:TBT) and Long Treasury (NYSEARCA:TLT) buying into this reversal. TBT and TLT both signaled money going into treasuries which is typically not good for "Risk on" assets. The US Dollar ETF (NYSEARCA:UUP) reversed today up fractionally with the Euro ETF (NYSEARCA:FXE) down across the board. Overall options activity was fairly muted today with just over 13M contracts trading going into the final hour with Apple (NASDAQ:AAPL) again moving more than 650K of these contracts.

Options Paper:

First Solar (NASDAQ:FSLR) was noted in the sonar; a large put spread buyer of the March 39 - 32 put spread some almost 12K times. Today this trade was closed out and rolled down selling the 39-32 put spread and rolling it to the March 34-27 put spread keeping the leverage on hot and heavy. This trade has already been extremely profitable as I mentioned I closed my FSLR short today but will look to re-enter some time tomorrow selling the highest strikes of volatility prior to earnings tomorrow night. Puts outnumbered calls more than 3:1 on the day on more than 3x average daily volume. Puts were bought on the ask more than 47% of the time and calls were 46% of the time but net premium suggests bearish moves going forward.

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

Calls outnumbering Puts:

Foot Locker (NYSE:FL) 37:1

Kellogg (NYSE:K) 79:1 (Dividend Steal no big action here)

Louisiana-Pacific (NYSE:LPX) 38:1 (Call buyers throughout the day)

United Technologies (NYSE:UTX) 4.5:1 (My Speculative play Friday could work here)

Roper Industries (NYSE:ROP) 28:1

Harmony Gold (NYSE:HMY) 212:1

Pep Boys (NYSE:PBY-OLD) 200:1

Puts outnumbering Calls:

Safeway (NYSE:SWY) 9:1

Pulte Homes (NYSE:PHM) 6:1

Live Nation (NYSE:LYV) 22:1

Eagle Bulk (NASDAQ:EGLE) 29:1

FTI Consulting (NYSE:FCN) 67:1 (March 40 puts sold Jun 40 puts bought)

Ryland Group (NYSE:RYL) 164:1

Advance Auto Parts (NYSE:AAP) 6:1

SolarWinds (SWI) 6:1

Volatility Explosion:

Vivus (NASDAQ:VVUS) continues to have IV scream to the upside as calls and puts are flying off the shelves. Overall today net premium shows calls being sold and puts being bought. However, percentages show calls sold 30% of the time on the bid and calls bought 27% of the time on the ask. Puts on the other hand are moving 28% sold on the bid and 36% bought at the ask confirming this move. The largest moves of the day option rolls and a large collar on the April 30-19-10 line. Taking these out it appears retail traders continue to bet on upside where some pros could be signaling caution here and locking in of profits. Regardless IV moved up 10% after collapsing last week more than 50%.

Volatility Implosion:

Dendreon (NASDAQ:DNDN) saw implied volatility collapse today as one would expect after earnings. Calls were sold on the bid more than 42% of the time with March 15's sold almost 4K times today around 9:34 just before collapsing into the close. These calls were sold for .56 to end the day at only .05 which is more than a 90% decline throughout the day. Traders who were fast could have sold calls early in the day and financed the purchase of puts to get some serious returns today. The option volume was more than 4.5x average daily volume where calls outnumbered puts more than 2:1. Overall option activity was short term bearish on this recent high flyer.

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it!


I am long SDS, APC, TBT, PCLN

I am short: PBI, FXE, DB, EEM, AAPL, LYV,

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.