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Risk-On Returns Despite Precarious Macro Environment

Jun 07, 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

 

 

Risk was back in a big way to kick off June as investors are positioning for an accommodative Fed/a positive surprise on trade. Market participants have started to treat bad news as good news, hoping it will prod the Fed to cut rates more quickly (June cut probability 22.5%; July cut probability 85%). That’s why, despite some weak jobs data, the market had a strong week with SPY rallying more than 3% while bonds were volatile and are set to close mildly stronger (US 10 year trading below 2.10%). Two-month implied volatilities in major equity indexes have reverted toward their low-60th percentiles (trailing one-year mean) while Bond Vol remains elevated (TLT 2m Implied in its 93rd percentile). Next week will deliver some more data points for the Fed to consider – we’ll get May CPI on Wednesday and Retail Sales Friday. 

Highlights from the past week

 

  • DOJ announces Anti-trust investigations into Google, Facebook and Amazon 
  • Powell: ‘Fed will act as appropriate to sustain expansion.’
  • ECB maintains dovish stance – ‘key rates to remain at present levels at least through the first half of 2020’
  • ADP Employment +27,000 vs. +185,000 est. – lowest since March 2010
  • Nonfarm Payrolls – +75,000 vs. 175,000 est.

 

Bullish: SPY 46,800 Jun 14th 291 calls trade (appears bough to open, $1.05, ref. 288.20)

Bullish: SLV Buyer 33,000 Jan 15 – 17 call spreads (paid $.265, appears to roll down, ref. 13.89)

Bullish: GDX Buyer 22,266 Jul 24 – 26 call spreads (paid $.31 to open, ref. 22.79)

Bullish: VIX Buyer 20,000 Aug 15 puts (paid $.875, ref. 17.20 (Aug))

 

Bearish: KRE Seller 31,000 Jun 51 – 45 put spreads to Buy 31,000 Aug 50 – 44 put spreads (paid $.33, ref. 52.18)

Bearish: JNK Buyer 25,000 Sep 100 – 95 1x2 put spreads (paid $.08, appears to add to position, ref. 106.90)

Bearish: EWW Seller 20,000 Jun 7th 41.5 puts to Buy 10,000 Jun 14th 41.5 puts (paid $.20 on the package and appears to roll down, ref. 42.90)

Bearish: USO 34,625 Jan 12 puts trade vs. 41,885 Jan 10 puts (appears to monetize and roll down, ref. 11.19)

 

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