blog

Latest from the Quantamize Blog

Trump Makes Vol Great Again

May 10, 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 16.6 80.56% 15.18 72.22% 0.91 4.76% 7.29 99.6% 5.62 98.02%
QQQ 20.28 72.22% 18.47 66.67% 0.91 10.32% 11.84 99.6% 8.03 99.6%
IWM 20.16 77.98% 18.2 73.41% 0.9 5.75% 6.51 98.81% 3.09 84.52%
FEZ 17.97 81.75% 17.4 83.13% 0.97 29.17% 5.79 94.05% 5.02 100.0%
EEM 21.61 76.98% 18.95 60.32% 0.88 3.57% 7.45 99.6% 4.01 100.0%

 

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

President Trump made Volatility Great Again and caught markets by surprise this week by turning into “Tarriff Man” once again. Although China’s top negotiator Liu He visited Washington, the US moved forward with the increase (from 10% to 25%) in tariffs on $200 billion of Chinese goods. In an effort to maintain pressure on the Chinese, President Trump has threatened additional tariffs (25%) on the remaining $325 billion of goods and has given an early June deadline for the two sides to come to terms. Towards the end of the day, Trump tweeted that the relationship between him and Xi remains ‘very one’ and that the tariffs could be removed at a later date. As of writing, the S&P has lost roughly 2% (ref. 287.75) since last Friday’s close while bonds have seen modest gains this week (TLT +.25%). Implied Vols (2M) among major equity indexes have spiked towards their upper quartiles and Cash VIX is now in the 16 range (touched 22.5 on Thursday; down roughly 17% Friday). Next week will bring some April economic data (Retail Sales, Consumer Confidence) and there could be a decision on European auto tariffs.

Highlights from this Week:

  • Tuesday busiest day for VIX options since Feb 2018 ; SPY closes down 1.65% on the day
  • US Treasury’s $27B 10-year Note Auction draws  2.479%; Bid-to-Cover Ratio: 2.17 V 2.35 Prior (lowest bid to cover ratio since March 2008) – indicating weak demand for Bonds.   
  • Fed’s Bostic: 25% tariff increase will lead to price increase
  • April CPI prints slightly below expectations (+0.3% vs. +0.4% est.) and Real Avg. Weekly earnings disappoint (+0.9% vs. 1.4% Y/Y)
  • Treasury Secretary Mnuchin deemed Friday’s talks ‘constructive’ – S&P rallies

Bullish: VIX Buyer 20,000 Jun 16 puts (paid $1.00, ref. 18.35 (Jun))

Bullish: SPY Seller 20,000 Jul 250 puts to Buy 20,000 Mar20 325 calls tied to stock (paid $.66, ref. 288.50)

Bullish: XME 12,000 Sep 36 calls trade (appears bought, $.11, ref. 28.46

Bullish: HYG Seller 8,000 Jun 84 puts (untied, collects $.31, ref. 86.13)

Bearish: FXI Seller 30,000 Jun 46 – 48 call spreads to Buy 30,000 Jun 42 puts (untied, paid $1.49, ref. 41.66)

Bearish: XEO Buyer 11,000 May 1270 – 1260 put spreads (Euro-style settlement S&P ETF, paid $3.20, ref. 1281.95)

Bearish: XLB 7,000 May 55 puts trade ($.44, appears opening, ref. 55.87)

Bearish: HYG Buyer 61,000 Aug 85 – 82 put spreads (paid $.67, ref. 86.10)

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