The Prepared Mind: July 20, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“Good Risk Management fosters vigilance in times of calm

and instills discipline in times of crisis.”

Dr. Michael Ong

A confluence of domestic and international factors led to a rally in US equities last week. The Greek government capitulated to the ECB and Eurozone finance ministers. This reduced the probability of Greek default – in the near term. The Chinese equity markets rallied from previous weeks lows. This stemmed the fear of market contagion in the US. Positive results from Google and Netflix propelled the tech-laden NDX to all-time closing highs. Google was up 26% and Netflix was up 18%. These individual moves propelled the NDX to a gain of over 5%.

 

Here is an overview of the market behavior last week:

Index 17-Jul Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 18086.45 326.04 1.84% 1.48% 12.11% (VXD)
S&P 500 (SPX) 2126.64 50.02 2.41% 3.29% 11.95% (VIX)
NASDAQ 100 (NDX) 4649.95 234.16 5.30% 9.69% 12.93% (VXN)
Russell 2000 (RUT) 1263.89 16.04 1.29% 4.91% 14.46% (RVX)
S&P 100 (OEX) 943.27 28.97 3.17% 3.84% 11.50% (VXO)
CBOE Volatility Index (VIX) 11.95 -4.88 -29.00% NA

Data Source: OptionVue7

 

The VIX closed at 11.95 on Friday. This is a closing low for 2015. The down move of 29% is the third largest one week move in the 25 year history of the VIX . The Indexes and ETP’s associated with the VIX showed similar movement.

 

Next week the CBOE Futures Exchange will begin trading futures contracts which expire every week. Options on the new futures contracts will begin trading pending regulatory approval.

 

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

Indexes Ticker 17-Jul 10-Jul Change % Change
CBOE Volatility Index VIX 11.95 16.83 (4.88) -29.00%
VIX July Future VXN5 12.925 16.775 (3.850) -22.95%
VIX August Future VXQ5 14.425 17.175 (2.750) -16.01%
VIX September Future VXU5 15.425 17.575 (2.150) -12.23%
CBOE Short-term Volatility Index VXST 9.72 17.24 (7.52) -43.62%
CBOE 3 Month Volatility Index VXV 14.61 17.76 (3.15) -17.74%
CBOE Mid-term Volatility Index (6 month) VXMT 16.13 18.62 (2.49) -13.37%
VIX of VIX VVIX 85.32 101.19 (15.87) -15.68%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 16.40 19.86 (3.46) -17.42%
pShares VIX Short Term Futures ETF VIXY 10.93 13.21 (2.28) -17.26%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 10.38 11.15 (0.77) -6.91%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 47.56 39.91 7.65 19.17%
ProShares Short VIX Short Term Future ETF SVXY 93.12 78.08 15.04 19.26%

Data Source: OptionVue7

The coming week is nearly devoid of impactful economic reports. The light calendar should offer a respite from previous weeks’ volatility. The markets will take their direction from 2nd Quarter earnings announcements. Last week’s announcement showed earnings higher than expected. It should be noted these earnings expectations had been lowered across the board.

The earnings season continue full bore this week.. Announcements (including those not meeting my earnings criteria) include: Halliburton, IBM, Morgan Stanley, Verizon, Microsoft, Apple, United Technologies, Abbott Labs, EMC, Texas Instruments, American Express, QUALCOMM, Coca-Cola, Boeing, AT&T, McDonald’s, Lilly, Comcast, Visa, 3M, Amazon, Union Pacific, Caterpillar, GM, Kimberly-Clark, Starbucks, Dow Chemical, Capital One, Bristol-Myers Squibb, and Biogen. . It is imperative for an option trader to know the date of earnings announcements in relationship to the expiration date of options being traded.   It is your responsibility to know the dates of announcements. You should call an confirm earnings dates with the individual company’s investor relations department. The July and August monthly expirations encompass over 90% of the 2nd quarter earnings announcements for the S&P 500. OptionVue provides information on the effect of individual earnings announcements on the historic stock price and the pre and post earnings implied volatility of the options. These OptionVue tools designed to help the trader successfully trade options around earnings plays. There are five different kinds of earnings play which OptionVue tracks.

I have provided a list of major earning announcements along with Friday’s closing price and implied volatility, and time of announcement. I have excluded the expected earnings. I included this for many years. I realized I never used the expected earnings in creating an earnings strategy for an individual equity. The number was only of interest after the earnings announcement. The selected stocks are the result of a scan for stocks announcing earnings in the coming week using the following criteria: Price > 20, 30 Day Implied Volatility > 22, and Average Daily Option Volume > 400 contracts. Once again, it is your responsibility to confirm these earnings dates. The date and time of earnings announcements can and do change.

 

Trading advice to remember:

 

“Chance favors the Prepared Mind.” – Louis Pasteur
“Yesterday’s bullet won’t kill you. Tomorrow’s bullet just might.” Bernie Provan

 

“Volatility is a symptom that people have no idea of the underlying value” – Jeremy Grantham

Monday July 20:

 

Economic: No major announcements.

 

 

International Economic: Germany PPI – 2:00 AM, Bank of Japan Minutes – 7:50 PM.

 

Optionable Earnings:

Symbol Company Name July 17 Close IV30 B/A
CALM Cal-Maine Foods Inc $53.66 44.61 B
EXAS EXACT Sciences Corporation $28.10 59.68 B
HAL Halliburton Company $40.21 31.83 B
HAS Hasbro, Inc. $78.42 25.80 B
ZION Zions Bancorporation $31.52 24.90 A

 

 

 

 

Tuesday July 21:

 

Economic: Redbook – 8:55.

 

International Economic: Japan All Industry Index – 12:30 AM.

 

Optionable Earnings:

Symbol Company Name July 17 Close IV30 B/A
ATI Allegheny Technologies Incorporated $26.61 41.56 B
BHI Baker Hughes Incorporated $58.87 30.53 B
CP Canadian Pacific Railway Limited (USA) $156.49 24.65 B
DOV Dover Corp $66.32 22.96 B
EDU New Oriental Education & Tech Grp $23.83 47.34 B
HOG Harley-Davidson Inc $55.68 29.10 B
LXK Lexmark International Inc $45.99 32.27 B
MAN ManpowerGroup Inc. $94.91 26.69 B
PNR Pentair PLC $64.38 27.38 B
SAP SAP SE (ADR) $74.60 22.48 B
SBNY Signature Bank $152.20 26.65 B
AAPL Apple Inc. $128.51 27.75 A
CMG Chipotle Mexican Grill, Inc. $658.46 34.24 A
FTI FMC Technologies, Inc. $36.93 33.90 A
GPRO GoPro Inc $55.24 55.14 A
HAWK Blackhawk Network Holdings Inc $43.16 39.23 A
IBKR Interactive Brokers Group, Inc. $45.00 27.13 A
ILMN Illumina, Inc. $230.86 32.32 A
IRBT iRobot Corporation $31.94 40.45 A
ISRG Intuitive Surgical, Inc. $490.01 31.27 A
LLTC Linear Technology Corporation $43.58 28.28 A
MANH Manhattan Associates, Inc. $61.92 33.90 A
MSFT Microsoft Corporation $46.66 24.92 A
PKG Packaging Corp Of America $66.04 26.67 A
VMW VMware, Inc. $85.04 31.39 A
YHOO Yahoo! Inc. $38.91 32.85 A

 

 

 

Wednesday July 22:

 

Economic: MBA Mortgage Applications – 7:00, FHFA Home Price Index – 9:00, Existing Home Sales – 10:00, EIA Petroleum Status Report – 10:30.

 

International Economic: No major announcements.

 

Other: Bank of England Minutes – 4:30 AM, Japan Merchandise Trade – 7:50 PM.

 

Optionable Earnings:

Symbol Company Name July 17 Close IV30 B/A
AN AutoNation, Inc. $65.99 23.04 B
APH Amphenol Corporation $54.95 22.54 B
ARMH ARM Holdings plc (ADR) $47.62 36.43 B
BEAV B/E Aerospace Inc $54.78 24.23 B
CHKP Check Point Software Technologies Ltd. $78.65 26.30 B
EMC EMC Corporation $25.21 25.17 B
LAD Lithia Motors Inc $116.88 31.21 B
MYCC ClubCorp Holdings Inc $24.19 23.47 B
NEM Newmont Mining Corp $21.38 36.42 B
OC Owens Corning $42.76 32.44 B
PII Polaris Industries Inc. $153.49 27.05 B
PNK Pinnacle Entertainment, Inc $39.41 32.21 B
BGS B&G Foods, Inc. $29.28 22.09 A
CAKE Cheesecake Factory Inc $53.92 24.57 A
CLB Core Laboratories N.V. $106.93 40.45 A
CRUS Cirrus Logic, Inc. $32.66 44.43 A
FFIV F5 Networks, Inc. $117.93 33.44 A
FTNT Fortinet Inc $42.76 36.45 A
INFN Infinera Corp. $21.65 53.56 A
MLNX Mellanox Technologies, Ltd. $48.16 49.55 A
QCOM QUALCOMM, Inc. $64.55 26.30 A
SCSS Select Comfort Corp. $30.35 45.16 A

 

 

 

Thursday July 23:

 

Economic: Weekly Jobless Claims – 8:30, Chicago Fed National Activity Index – 8:30, Bloomberg Consumer Comfort Index – 9:45, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30.

 

International Economic: No major announcements.

 

Optionable Earnings:

Symbol Company Name July 17 Close IV30 B/A
ABC AmerisourceBergen Corp. $111.88 22.17 B
ALK Alaska Air Group, Inc. $74.69 31.19 B
AOS A. O. Smith Corp $68.10 28.91 B
CAB Cabelas Inc $52.00 34.56 B
CAM Cameron International Corporation $50.94 35.24 B
CAT Caterpillar Inc. $83.76 22.22 B
CELG Celgene Corporation $134.72 26.47 B
CFX Colfax Corp $43.03 28.07 B
CS Credit Suisse Group AG (ADR) $29.11 25.27 B
DGX Quest Diagnostics Inc $73.87 23.46 B
DNKN Dunkin Brands Group Inc $55.23 25.35 B
DOW Dow Chemical Co $52.23 23.55 B
EQM EQT Midstream Partners LP $78.80 30.71 B
EQT EQT Corporation $76.72 28.95 B
GM General Motors Company $30.61 26.60 B
LAZ Lazard Ltd $57.25 26.86 B
LLY Eli Lilly and Co $87.17 29.14 B
LUV Southwest Airlines Co $34.57 33.77 B
MAC Macerich Co $78.49 27.32 B
PRLB Proto Labs Inc $69.95 36.44 B
R Ryder System, Inc. $91.13 23.99 B
SBUX Starbucks Corporation $55.74 23.29 B
SCHL Scholastic Corp $44.93 30.26 B
SHPG Shire PLC (ADR) $256.50 27.98 B
SIX Six Flags Entertainment Corp $47.10 28.22 B
STJ St. Jude Medical, Inc. $77.17 23.79 B
SYT Syngenta AG (ADR) $85.03 38.89 B
TEL TE Connectivity Ltd $62.79 23.47 B
TUP Tupperware Brands Corporation $65.52 28.04 B
UA Under Armour Inc $85.35 34.81 B
UAL United Continental Holdings Inc $54.98 40.52 B
USG USG Corporation $26.69 30.57 B
VRX Valeant Pharmaceuticals Intl Inc $238.85 34.40 B
WHR Whirlpool Corporation $170.00 28.73 B
WRLD World Acceptance Corp. $59.63 54.86 B
ALGN Align Technology, Inc. $65.37 35.62 A
AMZN Amazon.com, Inc. $475.48 40.85 A
ATHN athenahealth, Inc $114.28 41.75 A
BJRI BJ’s Restaurants, Inc. $49.00 41.09 A
CA CA, Inc. $30.71 24.73 A
CBI Chicago Bridge & Iron Company N.V. $48.90 61.97 A
ETFC E*TRADE Financial Corp $30.36 31.92 A
FSL Freescale Semiconductor Ltd $37.94 38.45 A
GIMO Gigamon Inc $31.93 56.03 A
JNPR Juniper Networks, Inc. $26.35 33.47 A
N NetSuite Inc $92.63 38.35 A
PFPT Proofpoint Inc $67.60 43.80 A
QLIK Qlik Technologies Inc $38.37 45.24 A
SNDK SanDisk Corporation $56.02 42.18 A
SPNC Spectranetics Corp $25.45 57.74 A
SWKS Skyworks Solutions Inc $102.37 47.53 A
TRIP Tripadvisor Inc $91.11 41.38 A
TRN Trinity Industries Inc $26.18 44.89 A
TSCO Tractor Supply Company $93.92 27.85 A
TXN Texas Instruments Incorporated $49.36 24.58 A
URI United Rentals, Inc. $81.78 37.11 A
XLNX Xilinx, Inc. $42.28 33.35 A

 

 

Friday July 24:

 

Economic: PMI Manufacturing Index Flash – 9:45 AM, New Home Sales – 10:00.

 

International Economic: No major announcements.

 

Optionable Earnings:

Symbol Company Name July 17 Close IV30 B/A
AAL American Airlines Group Inc $41.39 40.26 B
BIIB Biogen Inc $403.73 44.47 B
BPOP Popular Inc $29.12 44.50 B
COG Cabot Oil & Gas Corporation $29.51 29.01 B
JCI Johnson Controls Inc $47.53 26.14 B
LEA Lear Corporation $99.18 25.20 B
NS NuStar Energy L.P. $57.65 26.22 B
NSH NuStar GP Holdings, LLC $36.27 33.41 B
SAVE Spirit Airlines Incorporated $59.47 36.00 B
VOD Vodafone Group Plc (ADR) $37.04 22.15 B

 

 

 

Monday July 27:

 

Economic: Durable Goods Orders – 8:30, Dallas Fed Manufacturing Survey – 10:30

 

International Economic: Great Britain CBI Industrial Trends Survey – 6:00 AM.

 

Optionable Earnings:

Symbol Company Name July 17 Close IV30 B/A
CYOU Changyou.Com Ltd (ADR) $23.84 70.24 B
NSC Norfolk Southern Corp. $85.60 22.58 B
SOHU Sohu.com Inc $47.03 55.98 B
BIDU Baidu Inc (ADR) $190.10 38.44 A
EMN Eastman Chemical Company $79.63 24.49 A
HIG Hartford Financial Services Group Inc $47.28 27.69 A
RCII Rent-A-Center Inc $29.49 43.88 A
SIMO Silicon Motion Technology Corp. $30.21 51.43 A
SWFT Swift Transportation Co $23.29 44.92 A
SWN Southwestern Energy Company $21.92 39.76 A

 

 

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