The Prepared Mind: February 17, 2015

"Chance favors the prepared mind." -- Louis Pasteur

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

News Flash from CBOE:   This week’s Barron’s has a very interesting article on shifting patterns in the trade of the CBOE’s VIX – Volatility Index.   A flattening of the VIX futures curve is impacting trading volume and the price relationship between different months of the VIX futures. The VIX futures curve shows a level of perceived risk in the stock market over time. Changes in the structure and nature of the curve over the past two months are most clearly seen in the differences in price between the different monthly VIX futures. The change in structure has flattened the futures curve of the VIX. The flattening of the VIX futures curve is impacting strategies of larger traders and is impacting the trading volumes of one the CBOE’s most important products. These changes in trading structure merit close observation.

The domestic broad market reached all-time highs last week. A calming of global geopolitical and fundamental fears provided impetus for this move to the upside.   Positive EU negotiations with Greece and a tentative ceasefire in the Ukraine have injected a level of optimism missing from the markets the past few weeks.   The Greek market climbed 11.28% and the Russian market gained 10.5% The long-term prospects for each country appear to be uncertain. Despite last week’s gains, the Russian and Greek stock markets are still approximately 30% below their one year ago levels. The uncertainty in the Eurozone has been reflected in the Euro which is down 5.8% against the dollar in 2015.

Here is an overview of the market behavior last week:

Index Feb 13 Close Weekly Change % Weekly % 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18,019.35 195.06 1.09% 1.10% 14.85%(VXD)
S&P 500 (SPX) 2,096.99 41.52 2.02% 1.85% 14.46% (VIX)
NASDAQ 100 (NDX) 4,378.08 148.45 3.51% 3.31% 15.15% (VXN)
Russell 2000 (RUT) 1,222.27 17.10 1.42% 1.46% 18.3% (RVX)
S&P 100 (OEX) 923.43 19.37 2.14% 1.65% 14.48%(VXO)
CBOE Volatility Index (VIX) 14.69 (2.60) -15.04% NA

 

 

The VIX finished the week with its lowest closing price of 2015. Friday’s difference between the spot VIX and the February future was 1.81. February VIX future ends trading this Wednesday. Friday’s February VIX contract price indicates a level of concern greater than indicated by spot VIX. It will be an interesting exercise to track the difference between the spot and the futures the last two trading days of the February contract. I will not be inititating any new trades in the VIX.

 

Here is an overview of last week for the VIX and related products:

Indexes Ticker 13-Feb 6-Feb Change % Change
CBOE Volatility Index VIX 14.69 17.29 (2.60) -15.04%
VIX February Future VXF5 16.50 19.17 (2.67) -13.93%
VIX March Future VXH5 18.15 19.55 (1.40) -7.16%
VIX April Future VXJ5 18.53 19.80 (1.28) -6.44%
CBOE Short-term Volatility Index VXST 11.76 14.93 (3.17) -21.23%
CBOE 3 Month Volatility Index VXV 18.13 19.88 (1.75) -8.80%
CBOE Mid-term Volatility Index VXMT 19.43 20.87 (1.44) -6.90%
VIX of VIX VVIX 92.74 101.69 (8.95) -8.80%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 30.97 34.30 (3.33) -9.71%
pShares VIX Short Term Futures ETF VIXY 20.69 22.82 (2.13) -9.33%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 13.10 13.83 (0.73) -5.28%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 29.40 26.65 2.75 10.32%
ProShares Short VIX Short Term Future ETF SVXY 40.76 38.61 2.15 5.57%

 

A shortened trading week and a dearth of domestic economic news should reduce the potential for fireworks. International tensions could trump a quiet domestic environment. Both the Bank of England and the Fed will release minutes of their most recent meetings. The Bank of Japan will announce current monetary policy on Tuesday. Market focus will remain on international tensions in the Ukraine and the fiscal crisis in Greece. The markets will be susceptible to any damage done to guarded optimism about both countries.

The earnings cycle starts to wind down this week. OptionVue provides a column for the date of earnings announcements. Use it. OptionVue tools and charts assist you in determining the effect of these announcements on the historic stock prices and implied volatility of the options. Major earnings announcements include: Waste Management, Medtronic, Genuine Parts, CF Industries, Agilent, Garmin, Duke Energy, Fluor, EOG Resources, Marriott, Marathon Oil, Williams, Hormel, Priceline.com, Discovery, Wal-Mart, Nordstrom, Newmont Mining, Public Storage, Cabot Oil & Gas, and Deere & Co.    I have scanned for stocks announcing earnings the coming week using the following criteria: Price > 20, 30 Day Implied Volatility > 22, and Average Daily Option Volume > 400 contracts. It is your responsibility to confirm these earnings dates. Earnings dates can and do change.

Trading advice to remember:

“Chance favors the Prepared Mind.” – Louis Pasteur

“If a problem cannot be solved, enlarge it.” – Dwight Eisenhower

 

“A pessimist is one who makes difficulties of his opportunities,

an optimist is one who makes opportunities of his difficulties.” – Harry Truman

 

 

Monday February 16:

 

US Holiday – Presidents’ Day: All US Markets Closed

 

Economic: TD Ameritrade IMX – 12:30 AM.

 

International Economic: Germany Merchandise Trade – 2:00 AM, Japan Tertiary Index – 6:50 PM, China CPI and PPI – 8:30 PM.

 

Optionable Earnings:

Symbol Company Name Feb 13 Close IV30 B/A XEPS
VIPS Vipshop Holdings Ltd – ADR $21.44 54.7 A $0.09

 

Tuesday February 17:

 

Economic: Empire State Manufacturing Survey – 8:30, Housing Market Index – 10:00, E-Commerce Retail Sales – 10:00.

 

International Economic: Bank of Japan Announcement, Great Britain CPI & PPI – 4:30 AM.

 

Other: Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook and monetary policy in Philadelphia – 12:45.

 

Optionable Earnings:

Symbol Company Name Feb 13 Close IV30 B/A XEPS
AGIO Agios Pharmaceuticals Inc $118.44 70.8 B $0.55
GPC Genuine Parts Company $96.79 23.1 B $1.07
GT Goodyear Tire & Rubber Co $26.21 37.5 B $0.58
MGM MGM Resorts International $21.24 33.8 B $0.06
QSR Restaurant Brands International Inc $39.32 29.2 B $0.26
VDSI VASCO Data Security International, I $25.17 103.0 B $0.20
A Agilent Technologies Inc $40.02 33.6 A $0.41
CF CF Industries Holdings, Inc. $302.60 25.9 A $5.04
DVN Devon Energy Corp $65.78 33.6 A $1.10
FE FirstEnergy Corp. $37.17 23.5 A $0.75
FLS Flowserve Corp $58.31 31.3 A $1.13
FOSL Fossil Group Inc $98.74 44.4 A $3.10
JACK Jack in the Box Inc. $88.12 31.5 A $0.87
O Realty Income Corp $51.69 22.6 A $0.66
PHH PHH Corporation $23.94 31.5 A $0.49
RAX Rackspace Hosting, Inc. $49.77 45.5 A $0.19
TEX Terex Corporation $24.96 42.3 A $0.68
XEC Cimarex Energy Co $110.97 43.6 A $0.84

 

 

Wednesday February 18:

 

Economic: MBA Purchase Applications – 7:00, Housing Starts – 8:30, PPI – Final Demand – 8:30, Redbook 8:55, Industrial Production – 9:15.

 

International Economic: Bank of England Minutes – 4:30 AM, Japan Merchandise Trade – 6:50 PM.

Other: FOMC Minutes – 2:00.

Optionable Earnings:

Symbol Company Name Feb 13 Close IV30 B/A XEPS
CRTO Criteo SA (ADR) $40.29 55.4 B $0.25
FLR Fluor Corporation (NEW) $56.36 29.8 B $1.10
GRMN Garmin Ltd. $55.91 32.1 B $0.78
HLT Hilton Worldwide Holdings Inc $28.44 26.3 B $0.18
HUN Huntsman Corporation $24.18 39.2 B $0.36
MDCO The Medicines Company $28.88 46.0 B ($0.84)
NI NiSource Inc. $43.37 25.5 B $0.51
SBGI Sinclair Broadcast Group Inc $25.68 35.8 B $0.76
VA Virgin America Inc $33.86 62.5 B $0.82
ACT Actavis PLC $281.66 29.0 A $3.65
ARII American Railcar Industries, Inc. $54.72 48.0 A $1.09
ARRS Arris Group Inc $26.27 42.3 A $0.56
AVG AVG Technologies NV $20.48 43.6 A $0.23
AXLL Axiall Corp $46.89 43.0 A $0.23
BGS B&G Foods, Inc. $30.04 29.5 A $0.50
CAR Avis Budget Group Inc. $61.26 36.1 A $0.19
EOG EOG Resources Inc $94.80 32.3 A $0.99
ETE Energy Transfer Equity LP $58.30 36.6 A $0.39
ETP Energy Transfer Partners LP $59.21 29.0 A $0.67
FNF Fidelity National Financial Inc $37.34 24.4 A $0.47
MAR Marriott International Inc $79.02 23.6 A $0.65
MRO Marathon Oil Corporation $28.78 32.6 A $0.03
OIS Oil States International, Inc. $41.13 42.0 A $1.01
PCYC Pharmacyclics, Inc. $163.05 55.8 A $0.88
RGP Regency Energy Partners LP $24.13 32.9 A $0.14
SCTY SolarCity Corp $57.16 53.7 A ($1.26)
SUN Sunoco LP $50.12 33.8 A $0.61
SUNE Sunedison Inc $21.15 58.6 A ($0.33)
SXL Sunoco Logistics Partners L.P. $44.64 33.0 A $0.41
TERP TerraForm Power Inc $31.63 45.8 A ($0.01)
TRN Trinity Industries Inc $29.46 45.6 A $0.84
TS Tenaris SA (ADR) $30.48 37.0 A $0.63
WMB Williams Companies Inc $47.97 34.9 A $0.18
XPO XPO Logistics Inc $41.52 41.1 A ($0.12)
Z Zillow Inc $104.75 63.4 A $0.32

 

Thursday February 19:

 

Economic: Weekly Jobless Claims – 8:30, PMI Manufacturing Index Flash – 9:45, Bloomberg Consumer Comfort Index – 9:45, Philadelphia Fed Survey – 10:00, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30, EIA Petroleum Status Report – 11:00.

International: Germany PPI = 2:00 Sm, Germany CPI – 8:00 AM.

 

Other: Boston Federal Reserve Bank President Eric Rosengren speech on the U.S. experience with QE, in Frankfurt – 5:00 AM.

 

Optionable Earnings:

Symbol Company Name Feb 13 Close IV30 B/A XEPS
ANET Arista Networks Inc $60.99 51.4 B $0.68
BBW Build-A-Bear Workshop, Inc $20.80 62.9 B $0.27
DAN Dana Holding Corporation $23.00 40.3 B $0.47
DISCA Discovery Communications Inc. $30.34 33.4 B $0.41
GG Goldcorp Inc. (USA) $23.31 45.2 B $0.14
IDCC InterDigital, Inc. $50.36 37.7 B $0.36
IMAX IMAX Corporation (USA) $34.52 30.6 B $0.26
NBL Noble Energy, Inc. $48.85 37.7 B $0.35
PCLN Priceline Group Inc $1,091.95 29.1 B $9.30
PDCE PDC Energy Inc $48.57 66.0 B $0.19
PWR Quanta Services Inc $28.86 32.1 B $0.49
RS Reliance Steel & Aluminum $53.78 31.2 B $1.07
SIX Six Flags Entertainment Corp $45.16 28.0 B ($0.13)
TGP Teekay LNG Partners L.P. $37.96 30.4 B $0.52
TK Teekay Corporation $45.33 39.1 B $0.28
TMUS T-Mobile Us Inc $31.59 35.3 B $0.28
BLMN Bloomin’ Brands Inc $24.61 42.3 A $0.31
CLNY Colony Financial Inc $24.67 24.0 A $0.31
CYH Community Health Systems $47.22 38.5 A $1.23
EQIX Equinix Inc $227.74 32.5 A $0.98
FRGI Fiesta Restaurant Group Inc $62.13 37.1 A $0.31
INTU Intuit Inc. $89.39 24.9 A ($0.26)
JWN Nordstrom, Inc. $79.37 26.2 A $1.34
MHK Mohawk Industries, Inc. $171.92 27.4 A $2.22
NDLS Noodles & Co $25.73 56.6 A $0.14
NEM Newmont Mining Corp $24.51 38.7 A $0.12
SPN Superior Energy Services, Inc. $20.83 50.2 A $0.49
TEP Tallgrass Energy Partners LP $48.45 37.0 A $0.44
TSRO TESARO Inc $39.32 56.0 A ($1.05)

 

 

Friday February 20:

 

Economic: Atlanta Fed Business Inflation Expectations – 10:00.

 

International Economic: Germany GDP Flash – 2:00 AM, EMU GDP Flash – 5:00 AM, EMU Merchandise Trade – 6:00.

 

Optionable Earnings:

Symbol Company Name Feb 13 Close IV30 B/A XEPS
COG Cabot Oil & Gas Corporation $27.92 36.3 B $0.23
ENB Enbridge Inc (USA) $49.59 26.7 B $0.50
IRM Iron Mountain Inc $40.47 24.5 B $0.31
LH Laboratory Corp. of America $116.84 24.9 B $1.63
PEG Public Service Enterprise Group Inc. $39.78 23.4 B $0.48

 

Monday February 23

 

Economic: Chicago Fed National activity Index – 8:30, PMI Services Flash – 9:45, Existing Home Sales – 10:00, Dallas Fed Manufacturing Survey – 10:30.

 

International Economic:

 

Other: Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook and monetary policy in Philadelphia – 12:45.

 

Optionable Earnings:

Symbol Company Name Feb 13 Close IV30 B/A XEPS
AER AerCap Holdings N.V. $42.43 31.3 B $1.32
AWI Armstrong World Industries, Inc. $51.08 39.1 B $0.29
AXL American Axle & Manufacturing $24.95 30.4 B $0.54
CTB Cooper Tire & Rubber Co $37.02 32.7 B $0.62
DNOW NOW Inc $24.94 58.0 B $0.30
AGU Agrium Inc. (USA) $106.98 23.7 A $0.64
ESRX Express Scripts Holding Co $84.50 23.0 A $1.38
OKE ONEOK, Inc. $47.28 39.7 A $0.37
OKS Oneok Partners LP $45.40 39.0 A $0.58
ROSE Rosetta Resources Inc. $23.02 74.6 A $0.32
THC Tenet Healthcare Corp $43.55 42.3 A $1.20

 

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