blog

Latest from the Quantamize Blog

Trade Deal Speculation, “Patient” Fed has Risk back in Vogue

Jan 18, 2019

 

Diverse Option Strategies for All Risk LevelsDiverse Option Strategies for All Risk Levels
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 14.41 63.49% 15.69 69.84% 1.09 55.36% -14.46 1.19% -8.51 1.19%
QQQ 20.44 65.87% 20.9 72.62% 1.02 52.78% -15.4 0.79% -12.11 0.79%
IWM 19.33 74.21% 19.5 78.57% 1.01 43.06% -9.55 3.57% -6.98 1.59%
FEZ 15.33 50.0% 15.97 57.94% 1.04 64.68% -4.51 10.71% -3.09 9.13%
EEM 18.76 48.41% 19.17 46.83% 1.02 55.36% -0.34 52.38% -4.39 7.54%

 

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

Highlights from the past week

Investors: “Hey Alexa, put some Risk on.”

Alexa: “Okay, I’ll Buy Equities and Sell Treasuries.”

The market had a positive week thanks to speculation over trade progress and relatively strong earnings from the Banks. The S&P is now more than 13% off its December lows and the VIX ( ~17.66) receded roughly 10% this week.

If we do get a trade deal in the coming months, which the market appears to be pricing in, this may give the Fed more leeway to sneak in a rate hike. More clarity on trade could mean more uncertainty on the Fed’s path. 


 

Bullish: SPX Seller 19,000 Dec20 2100 puts (Seller collects $178M in Premium, ref. 2616.12)

Bullish: EEM Seller 104,120 Mar 38.5 puts (ref. 41.09)

Bullish: SPY Buyer 25,000 Apr 285 – 290 call spreads (ref. 261.87)

Bullish: XLP Buyer 10,000 Mar 54 calls (ref. 52.23)

Bearish: EWU Buyer 50,000 Feb 30 – 28 put spreads (Brexit hedge, ref. 30.40)

Bearish: EEM Seller 42,690 Dec 41 calls to Buy 142,300 Dec 37 – 30 put spreads (ref. 40.37)

Bearish: XHB Buyer 22,000 Feb 33 puts (ref. 34.50)

Bearish: SPY Buyer 26,696 Feb 258 – 242 put spreads tied to stock (ref. 264.42)

 

We saw a notable trend this week – traders monetizing and rolling their upside bets on banks. The nature of such a trade is to take risk off the table by monetizing in-money call spreads and rolling up to higher strikes. Technically speaking, these trades are “bearish” because they are short deltas but also maintain a bullish tilt thanks to the upside exposure. With traders “rolling up” it’s plausible that there’s steam left in the banks’ recent run.

 

Bearish: JPM Seller 8,000 Mar 105 – 110  call spreads to Buy 8,000 Mar 110 – 115 call spreads (ref. 102.09)

Bearish: WFC Seller 15,400 Mar 55 – 52.5 – 47.5 call flies (rolls up call spread, ref. 48.77)

Bearish: C Seller 9,400 Mar 57.5 – 65 – 70 call flies  (ref. 62.12)

 

OptionsQuantitatively derived options trades TRANSPARENT AND EASILY EXECUTABLE