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Powell, Market Butt Heads; Vol Bid as Equities Recede from Highs

May 03, 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 11.68 55.75% 12.05 44.44% 1.03 25.4% 5.32 98.81% 2.94 80.16%
QQQ 14.57 32.54% 15.87 37.7% 1.09 77.18% 7.59 98.41% 5.16 98.02%
IWM 15.29 56.75% 15.79 61.31% 1.03 54.37% 3.4 75.0% 1.43 60.91%
FEZ 13.41 35.71% 14.68 42.26% 1.09 66.47% 6.11 95.24% 2.83 92.06%
EEM 14.27 3.17% 15.13 2.38% 1.06 68.06% 4.89 94.44% 1.39 85.32%

 

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

This week offered  a bit of drama as Fed Chair Powell insinuated that the first quarter’s inflation data could be considered ‘transitory.’ That is, he is not likely to alter the central bank’s policy stance due to a  few softer-than-expected data points. Although the Fed has often been referred to as “accommodative” this year, the real policy stance has become increasingly tight as inflation continues to undershoot. Post press-conference, the market voiced its displeasure with that reality as the S&P had its worst day since March 22nd. As of writing, the S&P is set to lose roughly .75% over the past five trading days (ref. 291.18) while bonds have been volatile but are roughly flat this week. Implied vols among major equity index have ticked up but it’s worth noting that QQQ vol remains reasonable and is sitting in the bottom third of its trailing one year range. Cash  VIX is up more than 10% this week (ref. 14.42) and made the majority of its move in lieu of Powell’s comments. Next week is set to be quieter on the economic data front (April CPI will be the highlight next Friday) but may bring some new developments on the trade deal.

Highlights from this Week:

  • Fed leaves rates unchanged; Market reacts negatively/continues to price in 2019 cut(s)
  • Nonfarm Productivity +3.6% vs. 2.2% est.; Unit Labor costs fell 0.9% (vs. +1.5% est.) which adds to the recent theme of muted inflation pressures
  • Eurozone received some positive macro data (Eurozone Q1 GDP +0.4% Q/Q)
  • Chinese reflation story fragile but remains intact (Caixin Manufacturing PMI 50.2 vs. 50.9 est.)
  • April Consumer Confidence figure came in above expectations (129.2 vs. 126.8 est.)
  • Apr ISM Manufacturing came in soft (52.8 v. 55 est.; Lowest print since Oct 2016)
  • April ADP number blew away expectations (275,000 vs. 180,000 est.)

 

Bullish: SPX 17,900 Jul 3200 calls trade ($1.80, ref. 2929.90 (Jul))

Bullish: XOP 190,000 May 33 calls trade vs. 110,000 May 32 calls (trades in two separate blocks, appears to roll down, ref. 30.68)

Bullish: KRE Buyer 19,000 May 58 calls (paid $.33, ref. 55.81)

Bullish: SLV 40,000 Jun 14 calls trade (appears bought b/w $.32 and $.33, ref. 14.02)

Bullish: QQQ 20,000 Dec 230 calls trade tied to stock ($.34, ref. 190.97)

Bearish: SPY Buyer 30,000 Jun 28th 276 – 273 put spreads (paid $.29 avg. price, ref. 293.31)

Bearish: RSX 17,000 Jun 21 puts trade (paid $.40 on largest block, ref. 21.41)

Bearish: FXI Seller 75,000 Jun 47.5 calls tied to stock (opening, collects $.22, ref. 44.50)

Bearish: XLI 10,000 May 76.5 – 73.5 put spreads trade ($.32, ref. 78.00)

Bearish: VIX Buyer 25,000 Jun 17 calls (paid $1.50, ref. 16.08 (Jun))

 

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