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Dovish Fed Send Risk-Assets Higher; Dollar/Vol Head Lower

Jun 21, 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 13.12 55.56% 13.29 49.21% 1.01 25.99% 0.03 39.29% 1.48 47.62%
QQQ 16.86 46.43% 16.62 38.49% 0.99 42.26% -2.04 27.78% 0.76 42.46%
IWM 15.66 48.81% 16 50.4% 1.02 62.1% -0.17 38.1% 0.25 38.89%
FEZ 13.28 28.77% 13.37 5.16% 1.01 47.42% -2.22 17.46% -0.34 34.13%
EEM 16.43 26.39% 17.09 22.62% 1.04 58.53% 2 73.41% 0.89 61.71%

 

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 an exciting week for global financial markets as dovish central bankers sparked asset-buying of all types (Equities, Bonds, Commodities). Seemingly only dollar and volatility products headed lower as the S&P raced to all-time highs. For the week, the S&P gained roughly 2% while the US 10-year traded as low as 1.98% before drifting back toward 2.065% later in the week. The VIX July future is still trading above 16 as uncertainty remains around next week’s G20 summit. Currently, the options market is pricing in a ~1.35% move in the S&P and it’s difficult to know how the market will react. Certainly, progress on trade would be celebrated but would also increase the  probability of a less accommodative Fed. With 2-month implied vol in SPY below the 50th percentile of it’s trailing one year mean, the options market is presenting investors will reasonable value to protect gains.

Highlights from this Week:

  • Fed leaves rates unchanged; opens door to cuts in coming months – Dollar falls, Bonds/ Equities/Commodities rally
  • Trump and Xi have ‘very good telephone conversation’ – set to talk over dinner at G20
  • Draghi’s suggests further stimulus needed for Eurozone economy – ECB cut would likely force Fed’s hand
  • Crude oil rallies in sympathy with a weaker dollar and heightening tension between the US and Iran
  • First glimpse at June economic data fails to inspire confidence (June Empire Manuf. -8.6 v. +11.0 est.; June ISM Manufacturing PMI 501 v. 50.5 est.; Services 50.7 v. 51.0 est.)

Bullish: SPY 25,000 Aug 2nd 301 – 307.5 call spreads trade (opening, $1.65, ref. 295.98)

Bullish: KRE Buyer 10,000 Jul 5th 54 calls (paid $.37 to open, ref. 52.36)

Bullish: USO 15,000 Aug 2nd 11.5 calls trade tied to stock (appears bought to open, $.51, ref. 11.26)

Bullish: IWM Buyer 20,000 Jul 162 – 166 call spreads (paid $.43, 75,000 trade total, ref. 155.75)

Bullish: EEM Seller 30,000 Jul 40 puts to Buy 30,000 Jul 43 calls tied to stock (paid $.13, ref. 41.91)

 

Bearish: UUP Buyer 180,000 Jun – Jul 26 put spreads (Dollar ETF, paid $.16 to roll out, ref. 26.05)

Bearish: TLT Buyer 94,000 Jul 128 – 126 put spreads (paid $.26 to open, more than 125,000 trade total, ref. 131.65)

Bearish: VIX Seller 25,000 Jul 15 – 14 put spreads to Buy 25,000 Jul 24 calls (paid $.02, ref. 16.53 (Jul))

Bearish: VNQ Buyer 40,000 Sep 86 – 81 put spreads (appears to roll up, $.55, ref. 91.51)

Bearish: HYG Buyer 25,000 Aug 86 puts (untied, paid $.60, ref. 87.38)

 

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