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Volatility Reigns – Investors Flee to Safety

Dec 07, 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 18.33 93.65% 17.86 94.84% 0.97 14.29% -3.59 19.44% -1.21 35.71%
QQQ 23.88 87.3% 22.9 94.44% 0.96 25.79% -6.95 17.86% -5.18 20.63%
IWM 22.5 95.63% 21.19 98.41% 0.94 14.29% -2.59 18.65% -0.8 26.19%
FEZ 22.34 98.41% 19.9 98.41% 0.89 9.72% 2.31 72.22% 2.36 76.19%
EEM 23.7 86.11% 22.9 96.03% 0.97 27.38% -1.79 31.35% -1.69 29.76%

 

Highlights from the past week

 

  • On Monday morning President Trump tweeted “Relations with China have taken a BIG leap forward” – that did not age well (@Huawei) …  Equity markets appear to be tired of empty trade promises and lashed out with a major risk-off move. SPY is down more than 4% on the week (despite rallying Monday) and the 10-year yield has tumbled to 2.859% (it was 3.20% in early November). Given the market carnage, investors have become hesitant to price in any further rate hikes past December and VIX has climbed above 23. It’s anybody’s guess what will come next.

 

Bullish: SPY Buyer 30,000 Dec 28th 275 calls to Sell 100,000 Dec 28th 283 calls (ref. 265.25)

Bullish: TLT Seller 20,500 Dec 120 calls (closing) to Buy 20,500 Jan 121 – 127 call spreads (ref. 118.05)

Bullish: KRE Buyer 100,000 Jan 54.5 – 56 call spreads tied to stock (ref. 52.26)

Bearish: SPX Buyer 20,000 Dec 2625 – 2590 – 2550 put flies (ref. 2665.18)

Bearish: XME Buyer 30,000 Jan – Mar 24 put stupids (i.e. buys both, ref. 27.74)

Bearish: VNQ Seller 66,000 Jan 72 puts (closing) to Buy 60,000 Mar 74 puts (ref. 81.69)

 

 

  • It’s been a rough year for Gold – despite equity markets’ choppy YTD performance, the safety asset has mostly underperformed (down ~ 4%). And yet, GLD has quietly grinded higher over the past few months. As investors continue to deal with the ever-developing trade war and questions over rates, it’s plausible the Gold could see a haven bid in the immediate future.

Bullish: GLD Buyer 9,915 Dec 120 calls (ref. 116.61)

Bullish: GLD Buyer 8,000 Apr 120 calls (ref. 117.14)

Bearish: GLD 8,000 Jan 112 puts (ref. 117.76)

Bearish: GDX Seller 10,000 Mar 21 calls to Buy 10,000 Mar 19 puts (tied to stock, ref. 19.99)

 

  • In single name action, we saw a large trade in Tesla – as the stock approaches its YTD highs, one player doesn’t quite see a move to $420. Typically, Tesla doesn’t trade in significant size due to its penchant for big swings (lots of risk to market makers) but the following hit the tape Friday.

Bearish: TSLA Buyer 10,000 Jan 280 – 270 put spreads (ref. 374.24)