VIX - Options Volatility Sonar: Thursday Recap

by: Erick McKitterick

VIX - Market Sentiment

Thursday S&P futures moved just over 10 handles after the futures lifted all morning but then reversed steadily grinding lower into the open. However, the market took the weakness and just ripped into the open re-gaining the 20 and 30 day moving average pushing back toward the 10 day. Apple (NASDAQ:AAPL) lead the names higher pushing up another 2% today back to the 540.00 level lead trading more than 750K options on the day.

The spot CBOE Volatility Index (VIX) again failed to retake the 20.00 level which was accompanied by decreasing VIX futures which hurt those long volatility ETFs (NYSEARCA:VXX) and 2x volatility (NASDAQ:TVIX). VXX took it on the chin hard as the futures continued to collapse throughout the day. Keep in mind realized volatility right now is still only around 10% which means VIX and volatility products are technically expensive at this point as the VIX futures show below.


March VIX futures 21.38

April VIX futures 24.18

May VIX futures 25.65


March VIX futures 19.70

April VIX futures 23.23

May VIX futures 24.93

Options Paper

Anyone who reads my articles knows I'm wary of the run in homebuilders. DR Horton (NYSE:DHI) today saw a large run on the April 14 puts trading more than 20K contracts. The six largest trades today were all put buyers of the April and then May 14 puts in 500-plus block trades. Inflows into the puts came in hot and heavy as confirmed by the net premiums. Some call buyers stepped into this name as well but DHI saw a massive 93x average daily volume on the put side with 53% or 49K of those bought on the ask. Some bulls also stepped up today but as shown by the implied volatility rise it appears the pressure was defiantly on the buying side of the options market. DHI traded 10 puts for every 1 call in today's trading.

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

Calls outnumbering puts:

TiVo Inc (NASDAQ:TIVO) 160:1

Teradyne (NYSE:TER) 44:1

American Movil (NYSE:AMX) 36:1

O'Reilly (NASDAQ:ORLY) 31:1

Commercial Metals (NYSE:CMC) 26:1

Huntsman (NYSE:HUN) 24:1

Titanium Metals (TIE) 23:1

Foot Locker (NYSE:FL) 22:1

American Capital (NASDAQ:ACAS) 24:1

Puts outnumbering calls:

Zions Bankcorp (NASDAQ:ZION) 42:1 (Large buyer of April 18-16 put spread)

Dole Food (NYSE:DOLE) 7:1

NRG Energy (NYSE:NRG) 6:1

Public Service Enterprises (NYSE:PEG) 5:1

Time Warner (TWC) 5:1

Activision (NASDAQ:ATVI) 7:1

Pitney Bowes (NYSE:PBI) 8:1

Charles Schwab (NYSE:SCHW) 8:1

Dover Corp (NYSE:DOV) 13:1

SunTrust Banks (NYSE:STI) 6:1

Volatility Explosion

Monster Worldwide (NYSE:MWW) again saw IV shoot up more than 16% after renewed takeover or sale rumors surfaced. Today the biggest transaction by far was actually a call seller of the June 9 calls 2K times. Interestingly the rest of the moves were all bullish as March, April and June calls were being bought in 100-plus blocks all day long. Options activity was more than 7x average daily volume and calls outnumbered puts 7:1 in this name.

Volatility Implosion

Sequenom (NASDAQ:SQNM), another swing trade speculative Friday play stock, today saw IV collapse more than 19%. Put holders were hitting the sell buttons all day after the company reported yesterday after the close. The stock price jumped more than 16% on the day and call buyers of the January 7.5 calls are looking for more. More than 50% of all calls today were bought on the ask. Option volume was more than 6x average daily volume with calls outnumbering puts almost 1.5:1.

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, DB, EEM, AAPL, LYV, BSFT, GLD

I own Straddles: CCL (1:3 call and 1:3 put spread)

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.

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