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Volatility Falls Post Midterms, Bounces Friday

Nov 09, 2018

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 13.64 77.78% 14.24 79.37% 1.04 26.59% -7.36 10.32% -1.14 34.13%
QQQ 19.56 80.95% 19.51 82.54% 1 32.74% -14.11 1.19% -3.92 20.63%
IWM 16.65 81.35% 17.21 84.92% 1.03 33.93% -7.85 2.78% -0.46 26.19%
FEZ 15.76 70.04% 16.21 76.19% 1.03 45.44% -2.82 18.25% 0.11 47.22%
EEM 22.15 85.71% 21.44 87.7% 0.97 20.83% -8.38 6.35% -1.88 24.01%

Highlights from the past week

  • It’s been another up and down week for the market. After the midterm elections failed to deliver any surprises, equities saw a broad rally and the VIX fell below 20. However, major indexes have closed the week with consecutive negative sessions and Friday morning’s PPI figure makes a December interest rate hike increasingly likely.

Bullish: QQQ Buyer 32,000 Dec 190 call options (ref. 174.03)

Bullish: EEM Seller 97,800 Nov 43 call options (closing) to Buy 97,800 Dec 44 call options (rolls up and out, ref. 40.98)

Bearish: UUP (US Dollar ETF) Buyer 230,000 Jan 25 put options (ref. 25.54)

Bearish: SPX Buyer 40,000 Nov 30th 2200 put options (ref. 2726.86)

 

  • Oil continues to get crushed – prices have fallen for 10 consecutive sessions. WTI crude now sits in bear market territory and is more than 20% off its October highs. According to the latest EIA report, US output options hit an all-time high (11.6 million barrels per day) while demand fell for the seventh week in a row. Will this supply-demand dynamic keep the commodity under pressure or could geopolitical tensions lead to a reversal?

Bullish: USO Seller 25,000 Jan 13 – 12.5 put options spreads (ref. 13.47)

Bearish: XOP Buyer 100,000 Feb 31 put options (ref. 37.07)

 

  • Shares of General Electric shed ~ 8% on Friday as JP Morgan cut its price target to $6. The former bellwether recently cut its dividend to a penny and is down more than 50% YTD. Implied volatility sits at 52-week highs and some are looking to pick a bottom while others plan for more pain.

Bullish: GE 10,000 Jan20 13 call options trade (ref. 8.37)

Bearish: GE Buyer 23,500 Jan 9 – 7 put options spreads (ref. 9.21)