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Global Slowdown Sparks Fear, VIX Climbs

Mar 08, 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 13.47 59.92% 13.88 55.16% 1.03 32.74% 4.68 97.22% -5.45 25.0%
QQQ 18.16 55.56% 17.53 50.79% 0.97 35.12% 8.47 100.0% -7.01 27.38%
IWM 17.94 69.84% 16.9 65.87% 0.94 16.67% 4.7 90.48% -3.9 22.62%
FEZ 14.53 43.65% 16.13 66.27% 1.11 80.56% 1.6 64.88% 0.37 69.64%
EEM 17.59 40.08% 17.98 33.73% 1.02 48.02% 4.69 94.84% 0.92 78.97%

 

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

  • The theme this week was some unsettling economic data, especially abroad. Here’s a quick recap:
  • The U.S. trade deficit grew to $621 billion in 2018, its highest level since 2008 (we’re buying people’s stuff, people aren’t buying our stuff)
  • ECB lowered Eurozone growth forecasts (2019 GDP forecast cut to 1.1% from 1.7%)
  • Chinese Exports fell 20% during the month of February
  • Given today’s “global economy,” the concern is that slower growth abroad will spill over into the United States – i.e. less international demand = less growth for the US. Markets began to price in such a scenario this week as equities had a rough go of it around the world (SPY -2%, FXI -5%, EEM -2.5%  on the week). The VIX bounced forcefully off what had been year-to-date lows and is set to gain more than 25% over the past five days of trading. Bonds saw a strong reversal this week (TLT +1.5%) as investors sought safety. Next week will bring Retail Sales, Consumer Expectations and Inflation data.

Bullish: FXI Buyer 8,000 Apr 5th 44.5 – 46 call options spreads (ref. 42.61)

Bullish: SLV 32,000 May 14 call options trade (ref. 14.13)

Bullish: QQQ Buyer 8,000 May 185 call options (ref. 174.09)

Bullish: HYG Seller 25,000 Jun 86 – 82 put options spreads (appears to roll short put options up, ref. 85.29)

Bearish: VIX Seller 60,000 Apr 13.5 – 12.5 put options spreads to Buy 120,000 Apr 24 – 27 call options spreads (ref. 15.43)

Bearish: XBI Buyer 10,000 Apr 88 – 82 put options spreads to Sell 10,000 Apr 80 – 75 put options spreads (bearish condor, ref. 91.01)

Bearish: XOP Seller 117,500 Jun 28 put options to Buy 117,500 Sep 25 put options (monetizes, maintains bearish exposure, rolls out and down, ref. 28.22)

Bearish: SMH Buyer 10,000 Mar 29th 101 - 96 - 93 broken put options flies (paid $1.05, ref. 101.17)

  • Despite being on 52-week lows, one stock that has seen consistently bullish flow is CVS. In fact, this is backed up by 2-month Skew which is 2 standard deviations below its trailing one-year mean. The company will be presenting at Barclays Health conference next week (March 12th) but it’s worth pointing out that the majority of flow has been longer-dated.

Bullish: CVS Seller 6,000 Aug 50 put options to Buy 5,600 Aug 60 call options (ref. 55.00)

Bullish: CVS Buyer 15,000 Jan21 90 call options (more than 50,000 trade on the week, ref. 54.59)

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