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VIX closes week near 12 after breaking above 13 earlier in the week

Aug 24, 2018

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Implied Volatility Data for Liquid Macro Index ETFs

ETF 30D IV 30D IV Percentile 90D IV 90D IV Percentile 90D/30D IV 90D/30D IV Percentile 30D IV-20D HV 30D IV-20D HV Percentile 90D IV-60D HV 90D IV-60D HV Percentile
SPY 9.57 57.54% 11.14 59.13% 1.16 50.2% 2.33 79.17% 3.15 73.02%
QQQ 13.38 41.87% 15.76 58.93% 1.18 84.52% 2.22 65.48% 2.89 70.24%
IWM 11.27 16.67% 12.6 5.95% 1.12 66.27% -0.77 19.44% 1.55 36.51%
FEZ 13.94 68.25% 14.56 71.03% 1.04 32.34% -2.37 17.06% 0.2 41.27%
EEM 17.63 70.83% 18.76 77.38% 1.06 50.79% -0.77 32.14% 1.09 45.63%

Option Recap Week of 8/20/18 – 8/24/18

  • The U.S. and China resumed trade talks Thursday in Washington D.C. – some traders are looking for a bounce from China (FXI) though flow is communicating capped upside.  

Bullish: Seller 23,500 Sep 40 puts to Buy 23,500 Sep 43 – 45 call spreads (ref. 42.41)
Bearish: Seller 25,000 Nov 46 calls (ref. 42.41)

  • President Trumps remarks over rising interest rates has taken some steam out of the dollar’s recent run (down 1.39% over the last 7 days). The weaker dollar has benefitted Emerging Markets as EEM gained more than 2% on the week. In options action, we saw one player bracing for a steep move lower while others are hoping to capture a bounce.

Bullish: Seller 23,000 Dec 40 puts to Buy 23,000 Dec 44 – 47 call spreads (ref. 43.13)
Bearish: Buyer 88,295 Sep 33 puts (paid $.03, ref. 42.36)

  • With the US and Mexico (EWW) finalizing new auto rules and inching closer to revamped NAFTA, we saw one player try to get out in front of an announcement. 

Bullish: Buyer 8,800 Aug 24th 52 calls (ref. 51.55)

  • This week, the EPA unveiled a new clean power plan that rolled back some Obama-era regulations. With XLU moving higher over the last month, the news may have been priced in – that sentiment was reflected via options as the largest trades in the Utilities ETF (XLU) were both upside call sellers.

Bearish: XLU Seller 11,000 Dec 57 calls (ref. 54.32)

  • With Fed Chair Powell making comments in Jackson Hole this week, investors continue to keep an eye on the yield curve. The 2-10 year Treasury yield spread is now down to .21 bps – it’s worth noting that an inverted yield curve has been a consistent predictor of recessions. In XLF, the Financials ETF, we saw mixed flow while skew has moved consistently higher (up 20% over last three weeks) which echoes worries over the curve. 

Bullish: Buyer 77,282 Sep 29 calls (ref. 28.50)
Bearish: Buyer 35,700 Jun 26 puts (ref. 28.30)