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Trades we like this morning in Options Markets: MJ, UNG

Mar 22, 2019

Actionable and Transparent Quantitative ResearchActionable and Transparent Quantitative Research
Actionable and Transparent Quantitative ResearchActionable and Transparent Quantitative Research

 

  • 1-month Implied volatility for the SPDR S&P 500 ETF (SPY) is expensive when compared to realized volatility.  Now remember, the implied-realized spread is a measure of risk premium in options markets -- how much of a spread will investors require above current volatility levels to account for risk.  Right now, the 30-day spread is slightly under the 85th percentile, which suggests investors are requiring too high of a risk premium for SPY options.   
  • Absolute implied volatility for the ETFMG Alternative Harvest ETYF (MJ) continues to be rich.  While implied-realized spreads are not wide, overall volatility curve (for both implied and realized) is elevated.  Given our bullish bias to Marijuana, would consider AGAIN selling 90-day ITM Puts.  Since we recommended this strategy last week, MJ has rallied 6%, which means those of you who put it on captured 100% of the return! 
  • US Natural Gas Fund (UNG) 30-day and 90-day implied volatility is literally near its bottom percentile for both measures.  Implied-Realized spreads are well below their 1-year fair values.  Winter is over and demand for natural gas is going to wane.  The futures curve for natural gas is still upward sloping for the next few months -- remember UNG owns natural gas futures not actually cubic feet of natural gas!  The Quantamize models have a “SELL” trading signal for it right now.  We think a 30-day long put spread in UNG makes a lot of sense right now -- implied volatility is super cheap and you can put this trade without throwing away too much premium.

Major ETFs Block Trades From Yesterday

Bullish
  • EEM Buyer 62,400 Apr 40 puts to Sell 60,000 May 42 puts (appears to roll short puts up and out, collects $2.835m, ref. 43.50) 
  • QQQ Buyer 25,000 Apr 189 – 191 call spreads (paid $.23, ref. 181.21) 
  • GDX Buyer 100,000 May 24 – 25 call spreads (paid. $.18, ref. 22.42) 
  • XLK Buyer 25,000 Apr 76 calls (paid $.75, ref. 74.76)
Bearish
  • XOP Seller 27,500 Apr 34 calls trade tied to stock (collects $.18, ref. 31.39) 
  • EFA 60,000 May 64 puts trade (trades $.70, ref. 65.30) 
  • HYG Buyer 10,000 Jun 86 puts (paid $1.40, ref. 86.18) 
  • XLP Buyer 10,000 Apr 55 puts (paid $.58, ref. 55.05)

Implied Volatility Data For Liquid Macro Index ETFs

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ETF 30D
IV
30D IV
Percentile
90D
IV
90D IV
Percentile
90D/30D IV 90D/30D IV
Percentile

30-Day Implied-Realized
 Spread Percentile

90-Day Implied-Realized Spread Percentile
SPY 11.39 41.07% 12.53 42.06% 1.10 55.56% 84.52% 26.59%
QQQ 14.89 32.34% 15.72 25.0% 1.06 66.87% 87.3% 27.38%
IWM 15.53 57.74% 15.55 55.36% 1.00 38.89% 61.9% 34.52%
FEZ 12.44 15.87% 15.85 62.1% 1.27 96.63% 84.52% 80.16%
EEM 15.77 13.1% 16.65 8.73% 1.06 76.19% 65.08% 69.44%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

ETFs with most Expensive 30-Day Volatility (Percentile)

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Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
ETFMG Alternative Harvest ETF MJ 61.37 54.15 97.97% 93.92% 37.84% 33.78%
Invesco CurrencyShares British Pound ETF FXB 13.74 11.09 92.46% 77.58% 85.32% 40.87%
SPDR Bloomberg Barclays High Yield Bond ETF JNK 10.59 6.38 92.06% 21.43% 96.43% 7.94%
Xtrackers Harvest CSI 300 China A-Shares ETF ASHR 27.22 25.97 70.24% 64.09% 11.11% 75.79%
SPDR S&P Regional Banking ETF KRE 21.82 21.62 69.05% 71.83% 36.90% 46.03%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

ETFs with most Expensive 90-Day Volatility (Percentile)

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Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
ETFMG Alternative Harvest ETF MJ 61.37 54.15 97.97% 93.92% 37.84% 33.78%
SPDR EURO STOXX 50 ETF FEZ 13.89 17.29 38.10% 82.54% 91.67% 97.22%
Invesco CurrencyShares British Pound ETF FXB 13.74 11.09 92.46% 77.58% 85.32% 40.87%
SPDR S&P Regional Banking ETF KRE 21.82 21.62 69.05% 71.83% 36.90% 46.03%
iShares MSCI Europe Financials ETF EUFN 18.33 19.18 46.03% 66.07% 57.94% 81.75%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

S&P 500 Stocks with most Expensive 30-Day Volatility (Percentile)

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Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
The Walt Disney Company DIS 26.58 22.17 94.44% 84.92% 94.84% 57.94%
McCormick & Company, Incorporated MKC 27.21 20.56 93.65% 57.54% 95.24% 9.92%
Celgene Corporation CELG 41.88 31.88 92.46% 71.83% 51.98% 16.27%
Lamb Weston Holdings, Inc. LW 28.14 23.35 92.06% 51.79% 83.73% 32.14%
Biogen Inc. BIIB 37.77 36.36 90.08% 96.03% 2.78% 6.35%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

S&P 500 Stocks with most Expensive 90-Day Volatility (Percentile)

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Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
Biogen Inc. BIIB 37.77 36.36 90.08% 96.03% 2.78% 6.35%
CBRE Group, Inc. CBRE 22.31 24.13 75.69% 95.14% 79.17% 9.72%
ResMed Inc. RMD 24.57 27.51 57.54% 88.49% 55.16% 14.29%
Fox Corporation FOXA 25.93 28.02 69.05% 87.90% 0.40% 2.38%
The Kraft Heinz Company KHC 23.57 27.08 36.11% 86.11% 3.17% 1.19%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

ETFs with most Cheapest 30-Day Volatility (Percentile)

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Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
ProShares Ultra Technology ETF ROM 24.01 32.1 0.40% 10.71% 46.43% 18.65%
MSCI EM Bull and Bear 3X Shares ETF EDC 41.86 47.09 0.79% 2.38% 38.89% 67.46%
Vanguard FTSE Emerging Markets ETF VWO 14.02 16.07 0.79% 16.27% 39.29% 82.94%
iShares MSCI South Korea ETF EWY 15.03 16.89 0.79% 0.79% 53.57% 24.60%
Alerian MLP ETF AMLP 15.63 18.61 1.19% 20.24% 71.43% 16.67%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

ETFs with most Cheapest 90-Day Volatility (Percentile)

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Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
iShares iBoxx IG Corporate Bond ETF LQD 4.01 3.77 5.75% 0.40% 7.14% 0.40%
United States Natural Gas Fund UNG 20.52 20.69 2.78% 0.40% 28.17% 12.70%
iShares MSCI South Korea ETF EWY 15.03 16.89 0.79% 0.79% 53.57% 24.60%
The Real Estate Select Sector SPDR Fund XLRE 10.15 11.45 1.19% 0.79% 35.71% 18.65%
VanEck Vectors Russia ETF RSX 17.89 18.47 2.38% 1.19% 95.63% 87.30%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

S&P 500 Stocks with most Cheapest 30-Day Volatility (Percentile)

On Mobile/Tablet scroll to the right.

Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
Campbell Soup Company CPB 22.23 26.5 0.40% 10.71% 0.40% 0.79%
Nektar Therapeutics NKTR 49.53 56.2 0.40% 5.16% 36.51% 45.24%
Ulta Beauty, Inc. ULTA 23.22 28.86 0.40% 7.54% 6.75% 32.14%
Under Armour, Inc. UAA 31.11 42.45 0.40% 20.24% 55.16% 95.24%
General Mills, Inc. GIS 17.61 18.16 0.40% 0.40% 49.21% 51.98%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

S&P 500 Stocks with most Cheapest 90-Day Volatility (Percentile)

On Mobile/Tablet scroll to the right.

Name Ticker 30-Day
Implied Volatility
90-Day Implied
Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
General Mills, Inc. GIS 17.61 18.16 0.40% 0.40% 49.21% 51.98%
Genuine Parts Company GPC 18.11 16.23 36.11% 0.40% 94.44% 55.95%
Walmart Inc. WMT 14.59 17.01 3.57% 0.40% 71.03% 60.71%
The Williams Companies, Inc. WMB 17.61 19.65 0.79% 0.40% 37.70% 11.90%
Public Storage PSA 14.22 15.66 0.79% 0.40% 40.08% 5.56%

Note: Please see our Options FAQs to learn more about Implied Volatility and other advanced options volatility measures

Global Stock Indice Price Returns

 

 

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