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Volatility muted going in the Labor Day 3-day holiday weekend on weak volumes

Aug 31, 2018

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 9.87 60.32% 11.42 63.49% 1.16 50.2% 2.81 85.91% 3.64 83.53%
QQQ 14.68 59.92% 15.65 56.94% 1.07 47.82% 5.94 95.24% 2.85 69.44%
IWM 12.25 36.51% 12.9 14.29% 1.05 28.77% 3.53 78.17% 2.18 47.22%
FEZ 14.2 69.44% 14.75 72.62% 1.04 32.14% -3.37 15.08% 0.11 42.46%
EEM 19.05 82.54% 19.3 82.14% 1.01 23.61% -2.67 15.87% 0.88 44.84%

Options Recap Week of 8/27-8/31/18

  • With the Nasdaq making new all-time highs, this week’s largest trades in the QQQ’s were decidedly bearish. It’s plausible that traders are simply seeking to protect some of this year’s gains.

Bearish: QQQ Buyer 67,000 Dec 144 puts (ref. 42.41)

Bearish: QQQ Buyer 71,700 Oct 5th 172 puts (ref. 42.41)

  • As we highlighted last week, the 2-10 year Treasury yield spread is now roughly .20 bps – a worrisome signal as an inverted yield curve has been a consistent predictor of past recessions. Similar to last week, we saw bearish flow in XLF, the Financials ETF. Skew has climbed over the past month and 1m skew is now 1.05 standard deviations over its trailing 1-year mean, echoing worries over the curve.

Bearish: XLF Seller 69,500 Sept 29 calls to Buy 69,500 Sept 28 puts (ref. 42.41)

  • Emerging Markets had a rough go of it this week with President Trump threatening to implement $200 billion in tariffs on China as soon as next week. Thursday, EEM closed down close to 3% on the news. In options action, we saw a number of players closing their upside calls while others sought protection.

Bearish: EEM Seller 110,000 Sept 44.5 and 45 calls (closing, ref. 42.99)

Bearish: EEM Buyer 10,000 March 40 puts (ref. 44.01)

  • As the US and Canada seek to iron out NAFTA, some are looking to speculate on the outcome  via Ford options. We’ve seen traders play both sides as this week’s flow is mixed.

Bullish: F Buyer 10,100 August 31st 10 calls (ref. 9.97)

Bearish: Buyer 15,800 Sept 28th 9 puts (ref. 42.36)

  • One of the largest trades of the week came in Electronic Arts which is down roughly 20% from its July highs. Despite the recent weakness, one player is doubling down on a trade opened earlier in August (rolled January position out to March).

Bullish: EA Buyer 56,000 March 125 – 145 call spreads to Sell 77,000 March 100 puts versus closing a similarly bullish January expiration call spread collar (rolls out, ref. 116.35)