The Prepared Mind: August 17, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“Progress always involves risks. You can’t steal second base and keep your foot on first.”

– Frederick Wilcox

The broad based indexes showed modest gains despite the surprise devaluation of the Yuan and continued weakness in crude oil. The Chinese devaluation raised the specter of a global economic slowdown.   Analysts were added to the fear factor by talking of the impending impact of deflation upon world economies.   Market technicians are concerned about internals – market breadth, volume/liquidity, and participation. The August doldrums indicate a historical occurrence of a wait-and-see. There is no reason for traders to do anything in US stocks. September will the bring players in from the sidelines. Until then expect more range bound behavior in the major

 

Here is an overview of the market behavior last week:

Index 14-Aug Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17477.40 104.02 0.60% -1.94% 14.13% (VXD)
S&P 500 (SPX) 2091.54 13.97 0.67% 1.59% 12.83% (VIX)
NASDAQ 100 (NDX) 4532.63 12.22 0.27% 6.92% 16.41% (VXN)
Russell 2000 (RUT) 1211.85 5.94 0.49% 0.59% 18.04% (RVX)
S&P 100 (OEX) 920.75 4.43 0.48% 1.36% 13.93% (VXO)
CBOE Volatility Index (VIX) 12.83 (0.56) -4.18% NA

Data Source: OptionVue7

 

The SPX showed marginal gains and while the VIX and associated products were essentially unchanged to down. The VXV and the VXMT were up minimally. Some analysts pointed to this relative strength (?) as the result of the impending Red rate increase. The rationale was the longer term VIX indicators would hold value since they would be affected by a September increase. This rationale is is tenuous at best. The nominal changes –negative and positive – are minimal. These changes are best viewed as differences which do not make a difference. The August VIX future and associated options expire this coming Wednesday, August 19.

 

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

Indexes Ticker 15-Aug 7-Aug Change % Change
CBOE Volatility Index VIX 12.83 13.39 (0.56) -4.18%
VIX August Future VXQ5 14.275 14.275 0.000 0.00%
VIX September Future VXU5 15.125 15.225 (0.100) -0.66%
VIX October Future VX5V 15.825 15.925 (0.100) -0.63%
CBOE Short-term Volatility Index VXST 11.87 13.04 (1.17) -8.97%
CBOE 3 Month Volatility Index VXV 15.51 15.42 0.09 0.58%
CBOE Mid-term Volatility Index (6 month) VXMT 16.96 16.79 0.17 1.01%
VIX of VIX VVIX 89.38 82.57 6.81 8.25%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN VXX 15.99 16.13 (0.14) -0.87%
pShares VIX Short Term Futures ETF VIXY 10.66 10.75 (0.09) -0.84%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 10.22 10.29 (0.07) -0.68%
Inverse VIX ETP’s
Daily Inverse VIX Short Term ETN XIV 47.84 47.61 0.23 0.48%
ProShares Short VIX Short Term Future ETF SVXY 93.66 93.28 0.38 0.41%

Data Source: OptionVue7

There are very few economic releases this coming week. The most notable items are the Consumer Price Index (CPI) which will be released on Wednesday and numerous housing reports which will be released throughout the week. The end of the week will also bring earnings announcements from many US retailers.

The earnings season is slowing down. Numerous major retailers will be announcing earnings this week.   Announcements (including those not meeting my earnings criteria) include: Urban Outfitters, Estee Lauder, TJX, Analog Devices, Home Depot, Wal-Mart, Dick’s Sporting Goods, Hain Celestial, Staples, Hormel Foods. Target, Lowes, Ross Stores, American Eagle Outfitters, Intuit, Toro, Salesforce.com, Hewlett-Packard, Footlocker, Hibbett Sports, and Deere&Co. 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.

Advice to stimulate your imagination:

 

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

 

“It’s not because things are difficult that we dare not venture.

It’s because we dare not venture that they are difficult.” — Seneca

 

“Test fast, fail fast, adjust fast.” — Tom Peters

 

 

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 14 Close IV30 B/A
A Agilent Technologies Inc $38.56 28.09 BMO
EL Estee Lauder Companies Inc $89.81 28.40 BMO
AKRX Akorn, Inc. $43.87 57.41 BMO
URBN Urban Outfitters, Inc. $32.34 42.27 BMO

 

Tuesday August 18:

 

Economic: Housing Starts = 8:30, Redbook – 8:55.

 

International Economic: Japan All Industry Index – 12:30 AM, Great Britain PPI and CPI = 4:30 AM, Japan merchandise Trade – 7:50 PM.

 

Other:

                                             

Optionable Earnings:

Symbol Company Name August 14 Close IV30 B/A
CSIQ Canadian Solar Inc. $24.55 73.35 BMO
DKS Dicks Sporting Goods Inc $50.44 35.20 BMO
TJX TJX Companies Inc $70.57 23.18 BMO
CMCM Cheetah Mobile Inc (ADR) $22.62 90.36 AMC
ADI Analog Devices, Inc. $59.00 37.57 AMC
SINA SINA Corp $39.07 55.05 AMC
HAIN Hain Celestial Group Inc $67.48 35.15 AMC
DV DeVry Education Group Inc $27.68 49.01 AMC

 

Wednesday August 19:

 

Economic: MBA Mortgage Applications – 7:00, Consumer Price Index (CPI) – 8:30 AM, EIA Petroleum Status Report – 10:30.

 

International Economic: No major announcements.

 

Other: FOMC Minutes – 2:00 PM. August VIX future and associated options ex[ire

 

Optionable Earnings:

Symbol Company Name August 14 Close IV30 B/A
HPQ Hewlett-Packard Company $28.45 36.10 DMT
TGT Target Corporation $78.99 23.12 BMO
LOW Lowe’s Companies, Inc. $71.21 23.40 BMO
NTAP NetApp Inc. $30.62 36.85 AMC
LB L Brands Inc $80.70 25.01 AMC

 

Thursday August 20:

 

Economic: Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Philadelphia Fed Business Outlook Survey – 10:00, Existing Homes Sales – 10:00, EIA Natural Gas Report – 10:30.

 

International Economic: Germany PPI – 2:00 AM, Great Britain CBI Industrial Trends Survey – 6:00 AM.

 

Other: San Francisco Federal Reserve Bank President John Williams speech, in Jakarta – 2:45 AM.

 

Optionable Earnings:

Symbol Company Name August 14 Close IV30 B/A
QIWI Qiwi PLC $27.22 59.75 BMO
ROST Ross Stores, Inc. $53.63 27.51 BMO
TFM The Fresh Market Inc $29.22 35.48 BMO
SHLD Sears Holdings Corp $25.00 65.02 BMO
WUBA 58.com Inc (ADR) $50.55 62.27 BMO
JKS JinkoSolar Holding Co., Ltd. $22.06 68.42 BMO
INTU Intuit Inc. $104.90 24.70 AMC
CRM salesforce.com, inc. $71.40 50.03 AMC
GPS Gap Inc $34.25 28.92 AMC
QUNR Qunar Cayman Islands Ltd $38.20 67.75 AMC

 

 

Friday August 21:

 

Economic: PMI Manufacturing Index Flash, Consumer Sentiment – 10:00.

 

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

 

Optionable Earnings:

Symbol Company Name August 14 Close IV30 B/A
DE Deere & Company $93.10 26.17 BMO
SCCO Southern Copper Corp $27.41 34.09 AMC
FL Foot Locker, Inc. $72.66 26.47 AMC

 

Monday August 24:

 

Economic: Chicago Fed National Activity Index – 8:30 AM.

 

International Economic: No major announcements.

 

Other: Atlanta Federal Reserve Bank President Dennis Lockhart speech to public pension forum, in Berkley, California -3:55 PM.

 

Optionable Earnings:

Symbol Company Name August 14 Close IV30 B/A
QIHU Qihoo 360 Technology Co Ltd $61.40 38.30 AMC

 

 

 

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