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Fed Stands Firm, Market Cries Uncle

Dec 21, 2018

 

Diverse Option Strategies for All Risk LevelsDiverse Option Strategies for All Risk Levels
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 23.84 99.21% 22.28 100.0% 0.93 5.56% 2.23 76.59% 1.89 57.14%
QQQ 29.97 99.6% 28.01 100.0% 0.93 19.44% 0.82 55.56% -1.71 36.9%
IWM 27.84 99.6% 25.82 100.0% 0.93 11.31% 3.13 77.38% 2.54 63.1%
FEZ 22.05 98.02% 20.64 98.81% 0.94 22.22% 3.79 86.9% 3.19 84.52%
EEM 23.78 84.13% 24.35 98.41% 1.02 52.58% 2.09 75.4% -0.64 45.63%

 

Quantitatively-Derived Options Trades: Transparent and Easily ExecutableQuantitatively-Derived Options Trades: Transparent and Easily Executable

Highlights from the past week

  • This week was all about the Fed – consensus called for a “dovish hike” but Jay Powell had other ideas. His surprisingly hawkish bent spooked markets and helped send equities to year-to-date lows. As of writing, the S&P is down more than 6% on the week and 12% for the month of December – markets continue to make breathtaking intraday moves and the VIX is approaching 30. With the market and Fed at odds over the 2019 outlook, it wouldn’t be shocking to see more kicking and screaming. Will the Fed “feel the market” or are stocks set for more pain in the name of normalization?

 

Bullish: EEM Buyer 39,000 Feb 41.5 – 44 call options spreads (ref. 39.54)

Bullish: SPY Buyer 20,000 Dec 28th 263 – 272 1 x 2 call options spreads (ref. 256.38)

Bullish: XLE Buyer 28,000 Feb 61 – 64 call options spreads (ref. 56.59)

Bearish: HYG Buyer 75,000 Feb 78 - 75 - 72 put options butterflies (ref. 80.26)

Bearish: EEM Buyer 85,000 Jan 32 put options (ref. 39.59)

Bearish: QQQ Buyer 60,000 Jan 110 put options (ref. 158.02)

 

  • The government may shutdown for the holidays … but neither D.C. drama nor a struggling market can keep the Christmas spirit down! According to a CNBC report (via Adobe Analytics) $110.6 billion has been spent online since November 1st which marks an 18% uptick from last year. Despite what appears to be healthy consumer, XRT is down more than 8% for the week and  two of the sector’s largest trades this week were bearish.

 

Bearish: XRT Seller 13,800 Jan 40 put options (closing) to Buy 13,800 Jan 47 put options (rolls down, ref. 40.15)

Bearish: M Seller 25,000 Dec 30 put options (closing) to Buy 25,000 Jan 27 – 25 put options spreads (rolls out and down, ref. 29.48)

 

  • Let’s take a look at the largest trade of the week which came via the much-beleaguered GE. Despite a 7% bounce earlier this week on positive comments from Vertical Research Partners, the stock has pared most of its gains. One player is keeping foot on the gas and is looking for another sharp move lower when GE reports earnings on January 31st.

 

Bearish: GE Seller 250,000 Jan 6 put options (closing)  to Buy 200,000 Feb 1st 6 put options (rolls out, ref. 7.28)

Options
Quantitatively derived options trades TRANSPARENT AND EASILY EXECUTABLE