The Prepared Mind: August 10, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“Risk comes from not knowing what you’re doing”
― Warren Buffett

The Dow Jones Industrial Average was down for the seventh straight day on Friday. The longest losing streak in 4 years has left the DJIA down over 2.5% for the year. The rest of the indexes sold off for the week. The net result is all the major indexes with the exception of the NASDAQ 100, are hovering around unchanged for the year. The SPX remains firmly entrenched in the trading range of the past 6 months – 2045 to 2130. Trading in August is notoriously quiet. Trading moves are generally magnified due to a lack of liquidity and because the A team traders are on vacation.

The bull market abides despite the market drifting lower. The anticipated September Fed rate increase has tempered the bullishness. The range-bound chart for the S&P 500 is profoundly neutral. Buy signals from market sentiment as evidenced by equity only put/call ratios and VIX levels. These signals continue from last week. Market breadth indicators are sending out tepid sell signals.   One day of positive breadth would generate buy signals.   A move outside the range would be a game changer. Beware of a move below 2015.

Here is an overview of the market behavior last week:

Index 7-Aug Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17373.38 (317.08) -1.79% -2.52% 14.67% (VXD)
S&P 500 (SPX) 2077.57 (26.27) -1.25% 0.91% 13.39% (VIX)
NASDAQ 100 (NDX) 4520.41 (63.88) -1.39% 6.63% 16.90% (VXN)
Russell 2000 (RUT) 1205.91 (32.33) -2.61% 0.10% 18.15% (RVX)
S&P 100 (OEX) 916.32 (14.87) -1.60% 0.87% 14.76% (VXO)
CBOE Volatility Index (VIX) 13.39 1.27 10.48% NA

Data Source: OptionVue7

 

It was a very quiet week for the VIX and associated products. The VIX futures did not reflect traders’ concerns or fears about last week’s downturn in the S&P 500. In fact, the September and October VIX futures were down for the week.

The entire market, including volatility products, appears to have embraced the summer doldrums.

 

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

Indexes Ticker 7-Aug 31-Jul Change % Change
CBOE Volatility Index VIX 13.39 12.12 1.27 10.48%
VIX August Future VXQ5 14.275 13.975 0.300 2.15%
VIX September Future VXU5 15.225 15.325 (0.100) -0.65%
VIX October Future VX5V 15.925 16.075 (0.150) -0.93%
CBOE Short-term Volatility Index VXST 13.04 10.67 2.37 22.21%
CBOE 3 Month Volatility Index VXV 15.42 14.90 0.52 3.49%
CBOE Mid-term Volatility Index (6 month) VXMT 16.79 16.45 0.34 2.07%
VIX of VIX VVIX 82.57 81.77 0.80 0.98%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 16.13 16.02 0.11 0.69%
pShares VIX Short Term Futures ETF VIXY 10.75 10.67 0.08 0.75%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 10.29 10.39 (0.10) -0.96%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 47.61 48.04 (0.43) -0.90%
ProShares Short VIX Short Term Future ETF SVXY 93.28 94.02 (0.74) -0.79%

Data Source: OptionVue7

There are very few economic releases this coming week. The most notable items are US July retail sales and the August producer price index (PPI). Retail sales for July are expected to increase at a solid pace, after a downside surprise in June. The end of the week will also bring earnings announcements from many US retailers.

The earnings season is starting to slow down,  Announcements (including those not meeting my earnings criteria) include: Dean Foods, Rackspace Hosting, Sysco, Computer Sciences, Fossil, Cree, Zebra Tech, Cisco, Macys, Advance Auto Parts, Nordstrom, Kohl’s, and JC Penney. 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, time of announcement, and expected earning range. 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 > 200 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

 

“I am always doing that which I cannot do, in order that I may learn how to do it.” — Pablo Picasso

 

Monday August 10:

 

Economic:   Labor Market Conditions – 10:00, TD Ameritrade IMX – 12:30.

 

International Economic: No major Announcements.

 

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech in Atlanta – 12:25 PM.

 

Optionable Earnings:

Symbol Company Name August 7 Close IV30 B/A
CLDX Celldex Therapeutics, Inc. $22.20 71.39 BMO
ENDP Endo International PLC $81.70 39.35 BMO
HALO Halozyme Therapeutics, Inc. $22.43 68.63 BMO
HPT Hospitality Properties Trust $26.59 23.22 BMO
IPXL Impax Laboratories Inc $46.30 42.05 BMO
KPTI Karyopharm Therapeutics Inc $22.12 59.56 BMO
PEGI Pattern Energy Group Inc $21.95 47.73 BMO
STON StoneMor Partners L.P. $25.60 43.59 BMO
SYY SYSCO Corporation $36.25 26.26 BMO
DVAX Dynavax Technologies Corporation $27.74 65.11 AMC
FNV Franco-Nevada Corporation $40.30 41.32 AMC
KHC Kraft Heinz Co $79.76 24.56 AMC
KITE Kite Pharma Inc $71.98 64.11 AMC
LYV Live Nation Entertainment, Inc. $25.24 39.93 AMC
MR Mindray Medical International Ltd $27.16 36.78 AMC
NGL NGL Energy Partners LP $24.32 44.35 AMC
PDCE PDC Energy Inc $47.85 62.48 AMC
RAX Rackspace Hosting, Inc. $31.50 76.78 AMC
TRAK DealerTrack Technologies Inc $62.11 22.43 AMC
TTWO Take-Two Interactive Software, Inc. $31.54 50.55 AMC
VIPS Vipshop Holdings Ltd – ADR $22.00 72.19 AMC
XON Intrexon Corp $65.55 70.75 AMC

 

 

 

Tuesday August 11:

 

Economic: NFIB Small Business Optimism Index – 6:00, Productivity and Cost – 8:30, Redbook – 8:55, Wholesale Trade – 10:00.

 

International Economic: Bank of Japan Minutes – 7:30PM, Japan PPI – 7:50 PM

 

Other: OPEC releases its monthly report.

 

Optionable Earnings:

Symbol Company Name August 7 Close IV30 B/A
ACM Aecom $30.44 40.69 BMO
AER AerCap Holdings N.V. $46.22 32.39 BMO
FOSL Fossil Group Inc $64.30 52.02 BMO
PKX POSCO (ADR) $42.05 29.66 BMO
QIWI Qiwi PLC $28.82 59.84 BMO
TW Towers Watson & Co $127.02 22.73 BMO
ZAYO Zayo Group Holdings Inc $27.37 34.76 BMO
ZBRA Zebra Technologies Corp. $104.19 43.43 BMO
CREE Cree, Inc. $25.30 51.79 AMC
CSC Computer Sciences Corporation $63.54 36.87 AMC
CYBR Cyberark Software Ltd $58.64 80.58 AMC
MYGN Myriad Genetics, Inc. $31.53 53.47 AMC
RRGB Red Robin Gourmet Burgers, Inc. $88.79 52.14 AMC
SYMC Symantec Corporation $22.35 30.89 AMC

 

 

Wednesday August 12:

 

Economic: MBA Mortgage Applications – 7:00, Atlanta Fed Business Inflation Expectations – 10:00, JOLTS – 10:00, EIA Petroleum Status Report – 10:30, Treasury Budget – 2:00.

 

International Economic: China Industrial Production – 1:30 AM, China Retail Sales – 1:30 AM, EMU Industrial Production 5:00 AM, Japan Machine Orders – 7:50 PM.

 

Other: New York Federal Reserve Bank President William Dudley speech, in Rochester, New York. – 8:30 AM.

 

Optionable Earnings:

Symbol Company Name August 7 Close IV30 B/A
BABA Alibaba Group Holding Ltd $78.96 36.77 BMO
M Macy’s, Inc. $67.45 31.03 BMO
SHLX Shell Midstream Partners LP $38.13 42.44 BMO
CPA Copa Holdings, S.A. $75.84 41.31 AMC
CSCO Cisco Systems, Inc. $28.21 27.47 AMC
JUNO Juno Therapeutics Inc $44.81 74.34 AMC
NTAP NetApp Inc. $30.69 35.04 AMC
NTES NetEase, Inc (ADR) $146.03 54.08 AMC
SEDG Solaredge Technologies Inc $27.40 105.27 AMC
W Wayfair Inc $37.15 82.48 AMC

 

 

 

Thursday August 13:

 

Economic: Weekly Jobless Claims – 8:30, Retail Sales – 8:30, Import and Export Prices = 8:30, Bloomberg Consumer Comfort Index – 9:45, Business Inventories – 10:00, EIA Natural Gas Report – 10:30.

 

International Economic: Germany CPI – 2:00 AM.

 

Other: European Central Bank Minutes – 7:30 AM.

 

Optionable Earnings:

Symbol Company Name August 7 Close IV30 B/A
COTY Coty Inc $27.98 39.72 BMO
CSAL Communications Sales & Leasing Inc $21.34 38.54 BMO
DDS Dillard’s, Inc. $100.29 40.32 BMO
KSS Kohl’s Corporation $60.35 34.29 BMO
LJPC La Jolla Pharmaceutical Company $30.25 103.66 BMO
AAP Advance Auto Parts, Inc. $172.74 32.27 AMC
IOC InterOil Corporation (USA) $43.81 60.41 AMC
JWN Nordstrom, Inc. $74.48 26.24 AMC
PAH Platform Specialty Products Corp $23.27 35.63 AMC
SINA SINA Corp $40.95 55.46 AMC
WX WuXi PharmaTech (Cayman) Inc. $41.76 36.33 AMC
YY YY Inc (ADR) $61.24 39.23 AMC

 

 

Friday August 14:

 

Economic: PPI – Final Demand – 8:30, Industrial Production – 9:15, Consumer Sentiment – 10:00.

 

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

 

Optionable Earnings:

Symbol Company Name August 7 Close IV30 B/A
BPT BP Prudhoe Bay Royalty Trust $50.87 33.89 BMO

 

 

 

Monday August 17:

 

Economic:   Empire State Manufacturing Survey – 8:30, Housing Market Index – 10:00, Treasury International Capital – 4:00 PM.

 

International Economic: EMU Merchandise Trade – 5:00 AM.

 

Optionable Earnings:

Symbol Company Name August 7 Close IV30 B/A
A Agilent Technologies Inc $40.12 30.22 BMO
EL Estee Lauder Companies Inc $90.04 26.91 BMO
URBN Urban Outfitters, Inc. $32.37 44.01 BMO

 

 

 

 

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