VIX - Options Volatility Sonar: Tuesday Recap

by: Erick McKitterick

VIX - Market Sentiment

On Tuesday significant weakness weighed on the S&P futures which were under pressure, trading down more than 12 handles prior to the market open. European markets were down 2% across the board which were hammering futures in the U.S. all morning long. The price action initially broke both the 10-day and 20-day moving averages finding support around the 30-day moving average.

The spot CBOE Volatility Index (VIX) rose more than 15% today which one would think would be great news for volatility ETFs (BATS:VXX) and 2x volatility (NASDAQ:TVIX). Again the VIX is a number which is a moot point and the real number where these trade off of are the VIX futures. As one would expect VIX futures were up but were somewhat muted as both call sellers and put sellers came into the market. VIX futures are listed below.


March VIX futures 20.40

April VIX futures 23.68

May VIX futures 25.38


March VIX futures 22.38

April VIX futures 25.18

May VIX futures 26.65

Apple (NASDAQ:AAPL) reversed down big at the open only to recover throughout the day back toward the 530 level. AAPL contracts were more than 600K around the 1:30 time frame which again is heavy. Both calls and puts appear to be bought as net premiums on puts continued to increase throughout the day. The markets option volume had surpassed Monday total volume before 1:00 trading more than 13M contracts in total. Other indicators showed inflows into Treasury ETFs which is correlated with a down Ultrashort Treasury ETF (NYSEARCA:TBT) and increase in Long Treasury (NASDAQ:TLT) showed money continuing to move into treasuries. The market again traded down when the dollar strengthened as shown with the U.S. Dollar ETF (NYSEARCA:UUP). Combine this with the weakness in the Euro ETF (NYSEARCA:FXE) and the market traded down more than 1.5% today. This move is increased by the negative moves in the gold ETF (NYSEARCA:GLD) and silver ETF (NYSEARCA:SLV).

Options Paper

Materials ETF (NYSEARCA:XLB) saw some very large inflows into puts. Today early on the April 35 puts were bought more than 32K times with 30K in a single block at the ask of .92. Puts outnumbered calls more than 6:1 on the trading day with 85% of the puts being bought on the ask. This follows some very bearish paper which has moved into XLB of late so it appears the next leg here could be down. Option volume was almost 3x average daily volume in this name.

Yesterday the big move in Keryx (NASDAQ:KERX) had bulls running to buy calls in the biotech name and today bears are trying to slap down ViroPharma (VPHM). The April 25 puts were bought today in droves as more than 4.5K puts went off today with a single block going off for .50 3.4K times. Also the May 20 puts and March 30 puts were also active with puts taking up all 20 of the top trades for the day. This name normally only trades 450 puts a day so this activity is more than 10x average daily volume in this name. Open interest currently sits around the 6K level so if this is an opening position total contracts could move well north of the 9-10K range. Puts outnumbered calls 43:1 today with net premiums showing calls sold and puts bought.

Russell Index ETF (NYSEARCA:IWM) saw a large 60K June put spread buyer step in just before 2:00 today. The June 77-69 put spread was bought more than 60K times for just over 2.00. This 12M dollar bet would profit greatly if the IWM would retrace back to the 69.00 level. Overall option sentiment in IWM from a bid ask perspective were overall flat but net premium (mostly due to this one trade) show an incredible bearishness in this name. No positions were sold near term which is interesting as typically something like this would be a put roll. Overall puts were trading more than 2x average daily volume and outnumbering calls almost 3:1 on the day.

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

Calls outnumbering puts:

Central European (NASDAQ:CETV) 496:1

Centerpoint Energy (NYSE:CNP) 271:1

Moody's (NYSE:MCO) 110:1

MGIC Investment (NYSE:MTG) 106:1

Nexen (NXY) 31:1

Short S&P ETF (NYSEARCA:SH) 25:1

Frontier Communications (NASDAQ:FTR) 24:1 (Dividend Steal nothing to see here)


Bank of New York (NYSE:BK) 18:1

Puts outnumbering calls:

Career Education (NASDAQ:CECO) 2832:1 (Majority of puts sold so it would be bullish)

Hong Kong ETF (NYSEARCA:EWH) 54:1

ASML Holding (NASDAQ:ASML) 48:1

Overstock (NASDAQ:OSTK) 38:1 (Heavy put buying continues)

KBR Inc (NYSE:KBR) 26:1

Shaw Group (NYSE:SHAW) 21:1

Lexmark (NYSE:LXK) 21:1

Tech Data (NASDAQ:TECD) 10:1


Fushi International (NASDAQ:FSIN) 7:1

Volatility Explosion

McMoran Exploration (NYSE:MMR) saw a large jump in IV30 today moving up more than 21%. Both call and put buyers dominated today's trading moving the implied volatility upwards. The 18K calls which traded more than 42% were bought at the ask. This was in direct comparison of the almost 10K puts which traded with 73% bought on the ask. This would show both bears and bulls betting directionally but net premium favored the bears which reflects the price action today with MMR trading down 4.5%. Overall option volume was 1.5x average daily volume with calls outnumbering puts 2:1.

Volatility Implosion

Oncothyreon (ONTY) was just demolished in today's trading, down more than 40% and IV collapsing more than 152% or 63% relative to yesterday. The puts were being sold across the board today with the May 5's leading the way. Option volume was more than 10x average daily volume with both calls and puts being sold like wild fire. Check open interest tomorrow to see just how many contracts were outright closed. Keep an eye on this name as straddles could be good plays as we approach the 52-week low on IV30 of 55.02.

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it.


I am long SDS, APC, TBT, FAZ.

I am short: PBI, FXE, DB, EEM, AAPL, LYV, BSFT, GLD.

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.