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Volatility catches a bid – Stocks under pressure as yields tick higher

Oct 05, 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 10.3 63.1% 11.74 61.9% 1.14 42.86% 4.07 96.83% 4.99 95.63%
QQQ 17.03 75.4% 16.91 69.05% 0.99 21.03% 5.26 90.87% 4.81 95.04%
IWM 15.15 82.94% 15.33 78.77% 1.01 17.66% 4.37 86.51% 4.9 89.68%
FEZ 16.3 84.52% 15.48 78.37% 0.95 12.9% 2.87 78.57% 1.29 57.94%
EEM 20.99 90.87% 21.05 92.86% 1 24.21% 5.52 96.83% 2.93 72.02%

Options Recap Week of 9/29-10/05/18

  • A slew of strong economic data drove US yields higher throughout the week towards multi-year highs. The 10-year now sits at ~ 3.24% – its highest level since 2011. TLT, the 20+ Year Treasury Bond ETF, was particularly active as this week’s mixed flow reflects uncertainty over the direction of yields.

Bullish Options Strategies: TLT Buyer 36,000 Nov 118 call options (ref. 113.95)

Bearish Options Strategies: TLT Buyer 10,000 Dec 110 put options (ref. 114.59)

  • Adding fuel to the trade war fire, Bloomberg published a story alleging that the Chinese have hacked  numerous US companies (notably Amazon, Apple) by inserting chips into their servers. These chips, the size of a grain of salt, are reportedly capable of collecting data and allows for new code. The report was strongly denied by the US tech giants. Although Chinese markets were closed for the week, that hasn’t stopped traders from opening some large hedges in FXI (Chinese Large Cap ETF).

Bearish Options Strategies: FXI Seller 23,500 Nov 46 call options to Buy 23,500 Nov 40 put options  (ref. 41.94)

Bearish Options Strategies: FXI Buyer 29,000 May 37 put options (ref. 41.94)

  • In single name action, General Motors had an active week after announcing an autonomous vehicle partnership with Honda. The Japanese car manufacturer will invest $2.8 billion over the next 12 years in GM subsidiary, Cruise Holdings. Meanwhile, another American icon, General Electric saw strength after replacing John Flannery with Larry Culp. Despite a positive reaction to the news, this week’s largest trade was decidedly bearish. GE closed near its weekly high.

Bullish Options Strategies: GM Buyer 10,000 Jan2020 45 – 55 call options spreads (ref. 34.61)

Bearish Options Strategies: GE Buyer 158,000 Nov 12 – 10 put options spreads (ref. 12.46)