VIX - Options Volatility Sonar: Thursday Recap

by: Erick McKitterick

VIX - Market Sentiment:

Thursday, S&P futures were up after positive Unemployment numbers and Durable Goods both came in better than expected. In fairness, these numbers have been revised downward several times, so the beat is not impressive, in my mind. Yesterday, the NYMO Oscillator closed at -44.78, which is still more than 30 points from being in oversold territory. Positive earnings news coming from Aetna (NYSE:AET), Procter & Gamble (NYSE:PG), Dunkin' Brands (NASDAQ:DNKN), and Symantec (NASDAQ:SYMC) all had these stocks moving higher in the pre-market. On the other hand, both F5 Networks (NASDAQ:FFIV) and ABB (NYSE:ABB) all came in short of expectations

The spot CBOE Volatility Index (VIX) moved sharply lower today on this positive economic news. The oscillator moved much lower, down to the 17.30 level, before moving back up to the 18.40 level heading toward the close. Volatility ETF (NYSEARCA:VXX), 2x ETF (NASDAQ:TVIX), and alternative 2x ETF (NYSEARCA:UVXY) were crushed initially as futures were sold off, but then began to come back after the market could not sustain the rally.

VIX futures are below.


November VIX futures 18.93

December VIX futures 19.23

January VIX futures 20.45


November VIX futures 18.33

December VIX futures 18.85

January VIX futures 20.18

Options Paper:

Hasbro (NASDAQ:HAS) has been kept down after hitting resistance at the 40 level earlier this month. Today, more than 3K of the January 35 puts were bought, as bears suggest the next move is lower in this stock. Options volume was more than 4x average daily volume, and it appears someone is willing to put 360K on the line, saying HAS will go down prior to January expiration. Puts outnumbered calls more than 36:1, with 70% bought on the offer.

Another bullish bet showed up today in Halliburton (NYSE:HAL), as bulls try to play for a 100 day moving average bounce. HAL today saw more than 5K December 35 calls bought for .62, with open interest sitting at just 742. The energy space has been red hot, and it appears someone thinks (to the tune of 300K) that HAL will play catch up. Options volume was more than twice the daily average, with calls outnumbering puts more than 2:1.

Both Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) report after the bell today, and the big news today was straddle selling. Both saw massive option activity, with both put and call selling across the board. This is somewhat normal, as people continue to sell the raised volatility going into earnings. I have been short both AMZN and Netflix (NASDAQ:NFLX) for some time, but will look to take off the short during the market tomorrow, as both plays are in the weeklies. The AAPL straddle is pointing to a 33.00 move after earnings, and AMZN was looking for a 20.00 move (as of this writing). Regardless, both stocks will more than likely move the markets tomorrow, so keep some powder dry.

Popular ETFs and equity names with bullish/bearish paper:

Bullish Option Flows

Varian Medical (NYSE:VAR) More than 40x average calls traded today

PSS World Medical (NASDAQ:PSSI) 10.4K calls vs. an average of just 472 traded today alone

Expedia (NASDAQ:EXPE) Almost 50K calls traded vs. just 3.3K average

Bearish Option Flows

Colfax (NYSE:CFX) large volume of puts more than 33x average

Talisman (NYSE:TLM) 31x average volume

Eastman Chemical (NYSE:EMN) 19x average volume

Crocs (NASDAQ:CROX) Was destroyed today, and people were running for cover buying every put they could find

Disclosure: I am long AGNC, APC, KERX, PSX, SLW, TYC, UNH, WMB.

I am short: AMZN, FE, FXE, FXY, NFLX

I also have a AAPL 1:2 call and put spread both ways. 560 max profit target on downside and 680 on upside.

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.

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.