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Equities Wrap up Record Quarter, VIX Recedes to Low-End Range of 2019

Mar 29, 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 12.35 52.38% 13.25 51.59% 1.07 42.26% 0.74 55.56% -0.18 53.97%
QQQ 16.32 45.24% 17.22 46.83% 1.06 66.47% 2.02 68.25% -0.67 60.32%
IWM 16.76 63.89% 16.66 63.1% 0.99 36.11% -2.26 20.24% -0.46 49.8%
FEZ 15.59 60.32% 17.44 83.13% 1.12 77.98% 1.04 57.34% 2.94 95.24%
EEM 16.55 24.6% 17.84 36.51% 1.08 86.71% -0.5 40.67% 0.8 75.99%

 

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

 

It was a rather quiet week that offered a bit of optimism on the trade front in combination with further uncertainty over Brexit (May’s deal rejected a third time). As of writing, the S&P  is set to post its best Q1 gain since 1998 (more than 12.5%). Bonds continued to gain strength (TLT +1.1% on the week) which reflects some slowing economic data but also a market that increasingly pressuring the Fed toward cutting rates. Cash VIX fell roughly 20% even as concerns over growth, trade and the direction of monetary policy persist. One trade that caught our eye was an SPX hedge – paper bought 16,500 Apr 26th 2525 puts for $2.25 and coincides with the initial Q1 GDP print. Next week will bring Retail Sales, ISM Manufacturing and unemployment data.

Bullish: XLF Buyer 50,000 Apr 26.5 calls (100,000 trade, paid $.13, ref. 25.70)

Bullish: FXI Buyer 20,000 May 44.5 calls (ref. 43.77)

Bullish: GDX Buyer 49,000 Sep 25 – 27 call spreads (paid $.49, ref. 23.28)

Bullish: RSX Buyer 19,400 May 22 calls (Russia ETF, paid $.34, ref. 21.20)

Bearish: TLT Buyer 5,000 Sep 125 puts to Sell 10,000 Jan 110 puts tied to stock (paid $2.36, ref. 126.09)

Bearish: LQD 13,000 Sep 115 – 105 1x2 put spreads trade (ref. 119.09)

Bearish: KRE Seller 37,725 May 54 – 48 put spreads to Buy 38,325 May 48 – 43 put spreads (monetizes and rolls down, collected $2.40, ref. 50.17)

Bearish: VGK Buyer 11,000 May 52 puts tied to stock (Vanguard FTSE Euro ETF, paid $.80, ref. 53.22)

 

Although Crude Oil had a record-setting first quarter, Skew is starting to flash a warning sign.

USO – 2 Month Skew is 2.13 standard deviations over its trailing 1-year mean.

XOP – 2 Month Skew is 1.98 standard deviations over its trailing 1-year mean.

OIH – 2 Month Skew is 2.18 standard deviations over its trailing 1-year mean.

Generally speaking, oil and bond yields correlate fairly well but that relationship has broken down over the past three months. While Crude Oil gained 30% for the quarter, the 10-year has fallen from nearly 2.7% down to 2.4%. Something has to give and some mean reversion in oil wouldn’t be surprising.

XOP Seller 5,000 Apr 30 – 26 put spreads to Buy 15,000 Jun 27 – 24 put spreads (appears to roll out and down, adds units, ref. 30.54)

 

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