The Prepared Mind: March 2, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

by Frank Fahey

News Flash:   The CBOE has announced expanded trading hours for both CBOE Volatility Index (VIX) Index) options and S&P 500 Index (SPX) options, adding more than six hours of additional trading five days a week. The extended hours for VIX options are set to begin Monday, March 2, while the extended hours for SPX options are expected to start on Monday, March 9. The expanded trading hours for VIX and SPX options at CBOE will run Monday through Friday, beginning each day at 2:00 a.m. CT and ending at 8:15 a.m. CT. The 2:00 a.m. CT start in Chicago syncs with the 8:00 a.m. open of trading in London.

Last week was quiet trading week for the major indexes with all of them hover around unchanged. The week was characterized by minimal trading ranges, an absence of volatility and light trading volume. The Dow Jones Industrial Average, the Russell 2000, and the S&P 500 hit new all-time highs during the week. The NASDAQ Composite continues to flirt with 5,000. European markets rallied as Euro-zone finance minister bought more time with a four month extension of Greece’s bailout.

The slow grind upward was reflected by the technical indicators. The charts are bullish and will remain bullish as long as the SPX remains above support levels. A review of multiple technical analysts shows support levels ranging from 2090 to 2100.   Put-call ratios continue to drop and reaffirm buy signals. Market breadth is overbought while the VIX continues to decline. One of my earliest mentors on the options trading floor was a survivor of The Crash. Bob was a technician, yet he always reminded me, “Remember Frankie….Every ship which ever sank had charts.” I like to know know what other traders are thinking.   I have found chars and various technical indicators to be more important in determining trader sentiment than market direction.

Here is an overview of the market behavior last week:

Index Feb 27 Close Weekly Change % Weekly % 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18,132.70 (7.74) -0.04% 1.74% 13.23%(VXD)
S&P 500 (SPX) 2,104.50 (5.80) -0.27% 2.21% 13.34% (VIX)
NASDAQ 100 (NDX) 4,446.18 7.91 0.18% 4.91% 14.67% (VXN)
Russell 2000 (RUT) 1,233.23 5.64 0.46% 2.37% 16.67% (RVX)
S&P 100 (OEX) 925.47 (1.06) -0.11% 1.88% 13.28%(VXO)
CBOE Volatility Index (VIX) 13.34 (0.96) -6.71% NA

Last week was quiet for VIX and related products. The VIX March future continues to show a healthy premium to the cash VIX. This premium might be explained by the host of employment reports this coming week. “Employment Week” has historically been marked market volatility in anticipation of the release of the monthly Employment Situation report on Friday. The last six months of market behavior have not reflected this historic behavior.   Two of the larger trades in the VIX reflected an expectation of lower levels for the VIX. Russell Rhoads of the CBOE reported the sale of 4,000 March 18/21 Call Vertical for a net credit of $0.32. A separate trade was the purchase of 3,000 March 14.40/13.50 put vertical for $0.31. Both trades will profit if the VIX March Future moves from its current level of 16.825 to the current cash price of 13.34

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

Indexes Ticker 27-Feb 20-Feb Change % Change
CBOE Volatility Index VIX 13.34 14.30 (0.96) -6.69%
VIX March Future VXH5 15.82 16.95 (1.13) -6.67%
VIX April Future VXJ5 17.38 17.95 (0.57) -3.18%
VIX May Future VXK5 17.82 18.50 (0.68) -3.68%
CBOE Short-term Volatility Index VXST 10.60 11.74 (1.14) -9.71%
CBOE 3 Month Volatility Index VXV 16.89 17.29 (0.40) -2.31%
CBOE Mid-term Volatility Index VXMT 18.41 19.11 (0.70) -3.66%
VIX of VIX VVIX 85.23 85.78 (0.55) -0.64%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 27.62 29.05 (1.43) -4.92%
pShares VIX Short Term Futures ETF VIXY 18.38 19.29 (0.91) -4.72%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 12.51 12.94 (0.43) -3.32%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 32.75 31.29 1.46 4.67%
ProShares Short VIX Short Term Future ETF SVXY 64.33 61.42 2.91 4.74%

 

 

This will busy week for economic reports. Personal Income will be reported at the beginning of the week. Wednesday through Friday will bring a number of different employment reports. Analysts’ focus on these reports has been changing from concerns about the unemployment rate to wage growth, labor force participation rate, and growth in personal income. The European Central Bank, the Bank of Canada and the Bank of England will release policy statements this week.

The earnings cycle has wound down. 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: Sotheby’s, Autozone, Bob Evans Farms, Best Buy, Abercrombie & Fitch, PetSmart, Kroger, Big Lots, Costco, Footlocker and Staples, 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

 

Don’t gamble; take all your savings and buy some good stock

and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.” – Will Rogers

 

Monday March 2:

 

Economic: Personal Income and Outlays – 8:30, Gallup US Consumer Spending Measure – 8:30, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending – 10:00.

 

International Economic: EMU PMI – 4:00 AM.

 

 

Optionable Earnings:

 

Symbol Company Name Feb 27 Close IV30 B/A XEPS
BID Sothebys $43.95 33.2 B $1.24
EMES Emerge Energy Services LP $52.99 63.6 B $1.16
ENDP Endo International PLC $85.24 38.0 B $1.13
ICPT Intercept Pharmaceuticals Inc $219.07 71.0 B ($1.53)
JKS JinkoSolar Holding Co., Ltd. $21.80 66.8 B $0.90
MTDR Matador Resources Co $22.50 68.1 A $0.19
MYL Mylan Inc $57.24 28.6 A $1.04
PANW Palo Alto Networks Inc $143.05 42.3 A ($0.13)
PRAA Pra Group Inc $53.66 31.6 A $1.12
SSYS Stratasys Ltd $61.45 47.2 B $0.41
XLRN Acceleron Pharma Inc $41.00 61.8 B ($0.14)
XON Intrexon Corp $42.92 86.2 A ($0.19)

 

Tuesday March 3:

 

Economic: Gallup US ECI – 6:30, Redbook – 8:55.

 

International Economic: Germany PMI Manufacturing Index – 3:55 AM, EMU PMI Manufacturing Index – 4:00 AM,

 

Other: Federal Reserve Chair Janet Yellen speech on bank regulation in New York – 8:15 PM.

 

Optionable Earnings:

 

Symbol Company Name Feb 27 Close IV30 B/A XEPS
AMBA Ambarella Inc $58.01 63.1 A $0.39
BBY Best Buy Co Inc $37.55 38.3 B $1.36
BOBE Bob Evans Farms Inc $56.48 35.9 A $0.69
DKS Dicks Sporting Goods Inc $54.86 36.2 B $1.22
JD JD.Com Inc(ADR) $28.00 45.6 B ($0.07)
KATE Kate Spade & Co $34.46 46.0 B $0.27
NAV Navistar International Corp $29.96 49.1 B ($1.15)
RCPT Receptos Inc $126.51 60.4 A ($1.08)
VEEV Veeva Systems Inc $31.46 53.4 A $0.08
ZLTQ Zeltiq Aesthetics Inc $34.41 55.7 A ($0.03)

 

 

Wednesday March 4:

 

Economic: MBA Purchase Applications – 7:00, ADP Employment Report – 8:15, Gallup US Job Creation Index – 8:30, PMI Services Index – 9:45, ISM Non-manufacturing Index – 10:00, EIA Petroleum Status Report – 10:30, Beige Book – 2:00 PM.

.

International Economic: EMU PMI Composite – 4:00, EMU Retail Sales – 6:00 AM.

 

Optionable Earnings:

 

Symbol Company Name Feb 27 Close IV30 B/A XEPS
AMED Amedisys Inc $30.90 48.1 B $0.27
ANF Abercrombie & Fitch Co. $24.03 63.9 B $1.14
ATHM Autohome Inc (ADR) $39.61 58.5 B $0.25
HRB H & R Block Inc $34.48 26.9 A ($0.28)
W Wayfair Inc $23.50 73.8 B ($0.82)

 

Thursday March 5:

 

Economic: Chain Store Sales. Challenger Job-Cut Report – 7:30, Weekly Jobless Claims – 8:30, Productivity and Costs – 8:30, Gallup US Payroll to Population – 8:30, Bloomberg Consumer Comfort Index – 9:45, Factory Orders – 10:00, EIA Natural Gas Report – 10:30.

International: Germany Manufacturer’s Orders – 2:00 AM, Bank of England Announcement – 7:00 AM, European Central Bank Announcement – 7:45 AM.

 

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech on preparing for take off, at Atlanta Fed banking conference, in Atlanta – 12:40 PM.

 

Optionable Earnings:

 

Symbol Company Name Feb 27 Close IV30 B/A XEPS
BRLI Bio-Reference Laboratories Inc $35.24 32.8 B $0.36
CIEN Ciena Corporation $20.91 45.9 B ($0.06)
CNQ Canadian Natural Resource Ltd $29.49 41.7 B $0.78
COO Cooper Companies Inc $165.45 25.9 A $1.54
DMND Diamond Foods, Inc. $26.79 42.4 A $0.23
FNSR Finisar Corporation $21.07 57.2 A $0.15
JOY Joy Global Inc. $44.72 33.1 B $0.38
MEI Methode Electronics Inc. $39.49 58.2 B $0.48
PRTA Prothena Corporation PLC $27.52 70.0 B ($0.64)
TFM The Fresh Market Inc $38.04 44.9 A $0.52
TTPH Tetraphase Pharmaceuticals Inc $42.20 67.2 A ($0.60)
YY YY Inc (ADR) $54.63 59.7 A $0.86

 

Friday March 6:

 

Economic: Employment Situation – 8:30, International Trade – 8:30, Consumer Credit – 3:00.

 

International Economic: Germany Industrial Production – 2:00 AM, EMU GDP – 6:00 AM.

 

Other:

 

Optionable Earnings:

 

Symbol Company Name Feb 27 Close IV30 B/A XEPS
BIG Big Lots, Inc. $47.73 42.9 B $1.75
FL Foot Locker, Inc. $55.84 32.9 B $0.90

 

Monday March 9

 

Economic: Labor Market Conditions Index – 10:00.

 

International Economic: China CPI and PPI – 9:30 PM.

 

Other: Cleveland Federal Reserve Bank President Loretta Mester speech to NABE conference in Washington – 2:25 PM

 

Optionable Earnings:

 

Symbol Company Name Feb 27 Close IV30 B/A XEPS
QIHU Qihoo 360 Technology Co Ltd $46.99 59.4 A $0.54
URBN Urban Outfitters, Inc. $38.35 32.5 A $0.57

 

Comments are closed