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Equities Trade Within Tight Range, Skew Steepens

Mar 01, 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 11.41 39.48% 12.78 42.46% 1.12 63.29% 3.33 93.65% -8.29 8.33%
QQQ 15.26 34.13% 15.79 25.4% 1.03 52.38% 4.62 88.1% -11.03 9.92%
IWM 14.68 50.79% 14.58 42.46% 0.99 34.13% 4.74 92.06% -7.95 5.95%
FEZ 13.57 29.37% 14.16 29.96% 1.04 63.29% 2.1 71.63% -2.71 18.65%
EEM 16.63 21.23% 17.57 24.6% 1.06 77.98% 3.46 89.29% -0.5 59.52%

 

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

Equities Trade Within Tight Range, Skew Steepens

Economic data came in on the softer side this week but equity markets didn’t seem to care. Realized volatility was quite low as slowing growth was mostly offset by the pricing in of a late-March trade agreement. Both the S&P and VIX are set to close roughly unchanged for the week though it’s worth noting that 2m Skew has steepened across major indices (SPY, IWM, QQQ). Such a move in Skew implies the probability of a downward move is increasing. Perhaps the most notable trend this week was the action in bonds – from Tuesday’s close, TLT has fallen roughly 2.45% (i.e. yields are moving higher). That’s nearly a 4 standard deviation move in the product and is perhaps indicative of an increasingly risk-on environment. Next week will bring an ECB meeting (Mar 7th; rates expected to remain on hold) and the Feb employment report (Mar 8th).

Bullish: XLF Seller 48,401 Apr 24 puts to Buy 48,401 Apr 27 calls (ref. 26.55)

Bullish: FXI Seller 70,000 Mar 45 calls to Buy 45,500 May 47.5 calls (rolls out and up, ref. 43.67)

Bullish: IWM Buyer 15,000 Mar 8th 158.5 calls (ref. 158.16)

Bullish: XME Buyer 17,047 Apr 33 calls (ref. 30.89)

Bearish: VIX Seller 50,000 Apr 13.5 – 12.5 put spreads to Buy 100,000 Apr 23 – 26 call spreads (ref. 15.63)

Bearish: SPY Seller 12,000 Apr 5th 281 straddles to Buy 120,400 Apr 5th 261 puts (ref. 280.70)  

Bearish: KRE Seller 39,484 Mar 53 – 48 put spreads to Buy 39,324 May 54 – 48 put spreads (rolls out, moves long strike up, ref. 56.34)

Bearish: XLF Buyer 75,000 Jan21 24 puts (ref. 26.75)

 

According to the Trump Administration, ‘Tremendous Progress’ has been made with China on trade talks. Larry Kudlow told investors that President Trump and Chairman Xi are likely to meet in Mar-a-Lago before the end of March. In combination with Chinese government stimulus and the likely reconciliation of tensions with the U.S., we’ve seen quite a bit of bullish flow in China funds this week.

Bullish: YINN Buyer 9,000 May 26 calls (ref. 23.91)

Bullish: ASHR Buyer 3,500 Mar 8th 28 calls (ref. 27.52)

Bullish: FXI Seller 70,000 Mar 45 calls to Buy 45,500 May 47.5 calls (rolls out and up, ref. 43.67)

 

OptionsQuantitatively derived options trades TRANSPARENT AND EASILY EXECUTABLE
OptionsQuantitatively derived options trades TRANSPARENT AND EASILY EXECUTABLE