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Tariff Man Returns, Vol Expands

May 31, 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 16.27 76.39% 15.72 74.6% 0.97 15.08% 2.09 66.87% 4.08 87.3%
QQQ 21.24 73.41% 20.34 73.02% 0.96 25.2% 3.47 70.04% 5.83 94.84%
IWM 19.68 74.21% 18.91 77.38% 0.96 27.78% 0.12 38.49% 1.59 59.13%
FEZ 18.81 85.52% 15.54 54.76% 0.83 3.37% 1.8 68.45% 1.47 66.27%
EEM 18.74 60.52% 18.29 47.22% 0.98 27.58% -1.12 30.56% 1.56 83.73%

 

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

 

The last week of May was a microcosm of the whole month:

  • Consistently deteriorating economic data
  • A tariff-happy President

The above combination is obviously an equity-negative/bond-positive environment and that’s what played out this week with the S&P losing roughly 2.5% while TLT gained 3%. As an indication of just how turbulent the environment has become, JP Morgan is now forecasting two rate cuts this year (up from zero previously). As we look forward to the upcoming Fed meeting in June it would appear as though a ‘perfect storm’ could be brewing for equity investors:

  • Slowing domestic and global economic growth
  • A Protectionist President using tariffs as his weapon of choice
  • A market that perceives the Fed as too slow to react

Of course, any positive headlines on trade or a ‘nimble’ Jay Powell (we’ve seen him succumb to market pressures before) offers upside potential. But at this point, hoping for such an outcome feels  like wishful thinking at best. And as the saying goes … “Hope is not a strategy.”

Highlights from this Week:

  • May Dallas Fed Manufacturing print weaker than expected (-5.3 vs. 6.2 est.)
  • Housing data disappoints (Apr Pending Home Sales -1.5% m/m vs. +0.5% est.)
  • Chinese government says that US soy purchases are being ‘put on hold’
  • President Trump threatens Mexico with tariffs (5% set to go into effect on June 10th)  
  • Manufacturing data out of China softer than expected (May PMI 49.4 vs. 49.9 est.)

 

Bullish: FXI Buyer 40,000 Jul 42 – 44 call spreads (untied, paid $.33, ref. 40.15)

Bullish: HYG Buyer 153,000 Jun 28th 86.5 calls (paid $.10 to open, ref. 85.13)

Bullish: VIX Buyer 37,000 Jul 15 puts (paid $.60, ref. 17.92 (Jul))

Bullish: VIX Seller 11,000 Jul 3rd 25 calls (collects $.65, ref. 17.75 (Jul 3rd))

 

Bullish: GLD Buyer 10,100 Aug 127 calls (paid $.53, ref. 120.80)

 

Bearish: XLF Seller 88,478 Jun 27 – 24 put spreads to Buy 167,970 Jul 26 – 23 put spreads (rolls out and down, ref. 26.41)

Bearish: HYG Buyer 100,000 Jun 83.5 - 82.5 put spreads (paid $.14, ref. 85.42)

Bearish: VIX Buyer 20,000 Jun 21 – 25 – 29 call flies ($.26, ref. 18.15 (Jun))

Bearish: TLT Buyer 35,000 Jun 129 - 126.5 put spreads (paid $.45 to open, ref. 131.41)

Bearish: EWZ Buyer 82,000 Jun 39.5 – 37 put spreads (paid $.44, ref. 41.70)

Bearish: VNQ Buyer 40,500 Jun – Sep 81 put spreads (paid $.95, rolls out, ref. 86.53)

 

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