The Prepared Mind: October 19, 2015

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

“Chance favors the prepared mind.” — Louis Pasteur

By Frank Fahey

“If you’re not making mistakes, then you’re not doing anything. I’m positive that a doer makes mistakes.” – John Wooden

First, I must make a confession. Every week I caution my readers that it is their responsibility to know the dates of announcements. This is based on the fact that everything we read is not true. I did not follow my own advice. I was reading another calendar last week and read, “US Holiday–Columbus Day–All Markets closed.” This was not the case. The markets were not closed; US banks were closed. This was my mistake.   It is, also, a reminder to double check any news or statements which may affect trading or positions. I like many other purveyors of financial news am not infallible.

The market continues the bullish push upwards. This week’s bullish sentiment was more apparent in the VIX than in the percentage price moves in the market. The major indices have risen nearly 8% in October. This week’s move of approximately 1% is minimal in comparison to month-to-date performance. The chart for the S&P 500 (SPX) is very bullish even after a 160 point move for the month. Equity only call/put ratios are on buy signals. Mark breadth indicators are strong across the board. The VIX is in its second week of a bullish downtrend. The trend , by definition, will remain bullish as long as it closing under it 20 day moving average.

Here is an overview of the market behavior last week:

Index 16-Oct Weekly Change % Weekly 2015 YTD Volatility of Index
Dow Jones Industrials (DJIA) 17215.97 131.48 0.77% -3.41% 14.37% (VXD)  
S&P 500 (SPX) 2033.11 18.22 0.90% -1.25% 15.05% (VIX)  
NASDAQ 100 (NDX) 4434.13 65.00 1.49% 4.60% 17.20% (VXN)  
Russell 2000 (RUT) 1158.37 (6.41) -0.55% -3.85% 18.01% (RVX)  
S&P 100 (OEX) 901.24 10.39 1.17% -0.79% 15.08% (VXO)  
CBOE Volatility Index (VIX) 15.05 (2.03) -11.89% NA    

Data Source: OptionVue7

 

VIX is in its second week of a bearish (bullish for the SPXx, bearish for the VIX) downtrend. This trend, by definition, will remain bullish as long as the VIX closes under it 20 day moving average. Most trading platforms give you the ability to compute and chart the price of the VIX versus its 20 day moving average. The VIX closed below 16 for the first time since August. The VVIX, the volatility of the VIX, closed up nearly 10%. The longer term VIX indexes, VXMT and VXV, did not show the bullish sentiment for the market indicated by the VIX and other shorter term volatility indexes.

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

Indexes Ticker 16-Oct 9-Oct Change % Change
CBOE Volatility Index VIX 15.05 17.08 (2.03) -11.89%
VIX October Future (10/21/2015) VXY5 16.1 18.175 (2.075) -11.42%
VIX November Future (11/18/2015) VXX5 17.075 18.375 (1.300) -7.07%
VIX December Future (12/16/2015) VXZ5 17.725 18.725 (1.000) -5.34%
CBOE Short-term Volatility Index VXST 12.89 14.27 (1.38) -9.67%
CBOE 3 Month Volatility Index VXV 18.67 19.85 (1.18) -5.94%
CBOE Mid-term Volatility Index (6 month) VXMT 19.94 20.52 (0.58) -2.83%
VIX of VIX VVIX 97.58 89.08 8.50 9.54%
Long VIX ETP’s      
iPath S&P 500 VIX Short Term Futures VXX 19.69 21.27 (1.58) -7.43%
pShares VIX Short Term Futures ETF VIXY 13.12 14.17 (1.05) -7.41%
iPath S&P 500 VIX Mid-Tem Futures ETN VXZ 11.33 11.74 (0.41) -3.49%
Inverse VIX ETP’s      
Daily Inverse VIX Short Term ETN XIV 30.73 29.01 1.72 5.93%
ProShares Short VIX Short Term Future ETF SVXY 60.16 56.88 3.28 5.77%

Data Source: OptionVue7

This will be a quiet week for domestic and international economic reports. The domestic emphasis will be on homes and manufacturing. The major focus will be on earnings. The earnings season is in full swing this week.

Earnings announcements will straddle the monthly October expiration. Some announcements will occur before this expiration and others will occur after expiration.   The earnings announcements this week include: Halliburton, Morgan Stanley Lennox, Flextronics, Discover, Verizon, Chipotle, Cree, Travelers, United Technologies, Harley Davidson, Interactive Brokers, GM, Biogen Idec, ebay, SanDisk, allegiant, Citrix, Lumber Liquidators, Under Armor, Alphabet, Netflix, Lilly, 3M, Microsoft, Amazon, P&G, Google, and Tenneco. It is time to lay groundwork for the next earnings cycle. I will be putting on some earnings trades this week for my DiscoverOptions live trade sessions. The first trade is a 7 day double calendar for Under Armor. These will be the first in the series This will be an ongoing process of learning what does and does not work. I will perform a forensic audit on a losing trade to see if an alternative strategy would have worked better.

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 and confirm earnings dates with the individual company’s investor relations department. The October and November monthly expirations encompass over 90% of the 3nd 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 the previous 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

“It is not certain that everything is uncertain.” – Blaise Pascal

 

“Know what you own, and know why you own it.” – Peter Lynch
“Experience is making mistakes and learning from them.” – Bill Ackman

 

 

Monday October 19:

 

Economic: Housing Market Index – 10:00.

 

International Economic: Sunday night – China Industrial Production, Retail Sales, GDP – 9:30 PM.

 

Other:   Richmond Federal Reserve Bank President Jeffrey Lacker speech on the economics of early childhood education, in Richmond – 12:00 PM.

 

Optionable Earnings:

Symbol Company Name Oct 16 Close IV30 B/A
CE Celanese Corporation $64.16 35.82 BMO
GPC Genuine Parts Company $83.72 22.02 BMO
HAL Halliburton Company $39.26 37.13 BMO
HAS Hasbro, Inc. $75.33 35.24 BMO
MS Morgan Stanley $33.61 24.25 BMO
MTB M&T Bank Corporation $119.31 23.52 BMO
SIX Six Flags Entertainment Corp $48.70 27.32 BMO
HA Hawaiian Holdings, Inc. $29.25 51.13 AMC
IBM International Business Machines $150.09 24.22 AMC
SONC Sonic Corporation $25.99 40.63 AMC
ZION Zions Bancorporation $28.24 28.38 AMC

 

Tuesday October 20:

 

Economic: Housing Starts – 9:30, Redbook – 8:55.

 

International Economic: Germany PPI – 2:00 AM.

 

Optionable Earnings:

Symbol Company Name Oct 16 Close IV30 B/A
BK Bank of New York Mellon Corp $40.48 22.16 BMO
CP Canadian Pacific Railway Limited (USA) $152.23 29.85 BMO
DFS Discover Financial Services $55.36 24.45 BMO
DOV Dover Corp $59.80 29.86 BMO
EAT Brinker International, Inc. $51.36 31.12 BMO
HOG Harley-Davidson Inc $54.97 32.19 BMO
OMC Omnicom Group Inc. $71.71 23.20 BMO
PNR Pentair PLC $56.65 32.35 BMO
TGNA Tegna Inc $25.56 34.26 BMO
CMG Chipotle Mexican Grill, Inc. $723.81 37.51 AMC
CPHD Cepheid $33.13 76.47 AMC
CREE Cree, Inc. $25.00 50.50 AMC
FTI FMC Technologies, Inc. $34.78 40.71 AMC
IBKR Interactive Brokers Group, Inc. $38.50 35.07 AMC
ILMN Illumina, Inc. $151.84 44.81 AMC
IRBT iRobot Corporation $30.35 41.66 AMC
ISRG Intuitive Surgical, Inc. $462.31 40.16 AMC
MANH Manhattan Associates, Inc. $65.76 40.75 AMC
PKG Packaging Corp Of America $68.90 30.92 AMC
TUP Tupperware Brands Corporation $54.77 34.92 AMC
VMW VMware, Inc. $68.46 37.77 AMC
YHOO Yahoo! Inc. $33.48 45.10 AMC

 

 

 

Wednesday October 21:

 

Economic: MBA Mortgage Applications – 7:00, EIA Petroleum Status Report – 10:30.

 

International Economic: No major announcements.

 

Optionable Earnings:

Symbol Company Name Oct 16 Close IV30 B/A
ABG Asbury Automotive Group, Inc. $85.85 37.52 BMO
ABT Abbott Laboratories $41.87 23.24 BMO
ARMH ARM Holdings plc (ADR) $45.35 35.66 BMO
BA Boeing Co $137.39 24.57 BMO
BHI Baker Hughes Incorporated $56.19 44.48 BMO
BIIB Biogen Inc $268.41 45.09 BMO
CS Credit Suisse Group AG (ADR) $25.26 31.13 BMO
EEFT Euronet Worldwide, Inc. $75.58 34.31 BMO
FTK Flotek Industries Inc $20.06 60.16 BMO
GM General Motors Company $33.32 26.30 BMO
IPG Interpublic Group of Companies Inc $21.24 28.79 BMO
MAN ManpowerGroup Inc. $87.61 30.70 BMO
MDCO The Medicines Company $35.45 49.88 BMO
NLSN Nielsen Holdings PLC $47.72 25.98 BMO
NTRS Northern Trust Corporation $69.45 22.99 BMO
OC Owens Corning $43.15 35.90 BMO
PII Polaris Industries Inc. $119.69 33.81 BMO
STJ St. Jude Medical, Inc. $67.18 26.75 BMO
TMO Thermo Fisher Scientific Inc. $125.47 23.38 BMO
AMP Ameriprise Financial, Inc. $110.62 24.55 AMC
BRCM Broadcom Corporation $51.72 29.10 AMC
CA CA, Inc. $28.89 25.65 AMC
CLB Core Laboratories N.V. $117.31 47.48 AMC
CTXS Citrix Systems, Inc. $74.85 33.30 AMC
EBAY eBay Inc $24.51 35.05 AMC
KMI Kinder Morgan Inc $32.23 29.54 AMC
LAD Lithia Motors Inc $107.84 35.58 AMC
LRCX Lam Research Corporation $67.46 42.01 AMC
LVS Las Vegas Sands Corp. $49.46 38.18 AMC
MLNX Mellanox Technologies, Ltd. $44.23 49.95 AMC
NOW ServiceNow Inc $75.64 42.79 AMC
PFPT Proofpoint Inc $59.13 46.76 AMC
RHI Robert Half International Inc. $52.99 27.58 AMC
SNDK SanDisk Corporation $69.88 57.01 AMC
TSCO Tractor Supply Company $84.69 33.54 AMC
TXN Texas Instruments Incorporated $52.43 27.65 AMC
URI United Rentals, Inc. $69.27 46.80 AMC

 

 

 

Thursday October 22:

 

Economic: Weekly Jobless Claims – 8:30, Chicago Fed National Activity Index – 8:30, FHFA House Price Index – 9:00 Bloomberg Consumer Comfort Index – 9:45, Existing Home Sales – 10:00, Leading Indicators – 10:00, EIA Natural Gas Report – 10:30, Kansas City Fed Manufacturing Index – 11:00.

 

International Economic: EMU EC Consumer Confidence – 10:00 AM.

 

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

 

Optionable Earnings:

Symbol Company Name Oct 16 Close IV30 B/A
ACOR Acorda Therapeutics Inc $30.91 62.85 BMO
ADPT Adeptus Health Inc $83.15 84.76 BMO
ALK Alaska Air Group, Inc. $75.98 33.13 BMO
ASPS Altisource Portfolio Solutions S.A. $31.37 76.42 BMO
BEN Franklin Resources, Inc. $37.81 23.95 BMO
CAB Cabelas Inc $43.54 40.53 BMO
CAM Cameron International Corporation $66.85 30.95 BMO
CAT Caterpillar Inc. $70.83 29.31 BMO
DGX Quest Diagnostics Inc $64.07 24.50 BMO
DHR Danaher Corporation $89.06 22.56 BMO
DNKN Dunkin Brands Group Inc $42.16 30.29 BMO
DOW Dow Chemical Co $47.58 28.87 BMO
EQT EQT Corporation $76.50 34.07 BMO
GRA W. R. Grace & Co $98.87 25.97 BMO
LAZ Lazard Ltd $45.94 33.00 BMO
LLY Eli Lilly and Co $79.86 27.70 BMO
LUV Southwest Airlines Co $41.24 32.23 BMO
MCD McDonald’s Corporation $103.66 24.48 BMO
MJN Mead Johnson Nutrition CO $74.51 41.65 BMO
NUE Nucor Corporation $42.18 26.85 BMO
PH Parker-Hannifin Corp $102.37 33.93 BMO
PRLB Proto Labs Inc $64.73 42.29 BMO
QLIK Qlik Technologies Inc $36.72 50.52 BMO
QSR * Restaurant Brands International Inc. $36.10 32.43 BMO
R Ryder System, Inc. $73.29 30.19 BMO
SNA Snap-on Incorporated $160.60 25.14 BMO
SWK Stanley Black & Decker, Inc. $98.73 25.00 BMO
UA Under Armour Inc $99.49 42.37 BMO
UAL United Continental Holdings Inc $57.76 40.05 BMO
UNP Union Pacific Corporation $94.26 24.90 BMO
USG USG Corporation $26.02 34.52 BMO
ALGN Align Technology, Inc. $60.65 38.88 AMC
AMZN Amazon.com, Inc. $562.44 43.15 AMC
ATHN athenahealth, Inc $141.45 44.78 AMC
BCR C R Bard Inc $192.95 25.49 AMC
CBI Chicago Bridge & Iron Company $44.68 58.18 AMC
COF Capital One Financial Corp. $74.52 26.12 AMC
DECK Deckers Outdoor Corp $59.48 49.40 AMC
ETFC E*TRADE Financial Corp $26.29 36.37 AMC
FTNT Fortinet Inc $43.24 43.13 AMC
GIMO Gigamon Inc $21.40 67.88 AMC
GOOG Google Inc. $661.74 32.36 AMC
GOOGL Alphabet Inc $693.02 32.50 AMC
JNPR Juniper Networks, Inc. $30.00 37.47 AMC
KLAC KLA-Tencor Corp $52.65 35.56 AMC
LOGM LogMeIn Inc $68.35 48.16 AMC
MSFT Microsoft Corporation $47.01 24.05 AMC
MXIM Maxim Integrated Products Inc. $38.92 38.45 AMC
N NetSuite Inc $89.02 40.17 AMC
NTGR NetGear, Inc. $32.46 36.25 AMC
PFG Principal Financial Group Inc $48.77 26.95 AMC
SKX Skechers USA Inc $44.22 54.11 AMC
SMCI Super Micro Computer, Inc. $25.99 58.76 AMC
SYNA Synaptics, Incorporated $86.97 55.94 AMC
TRN Trinity Industries Inc $27.70 50.08 AMC
VRSN Verisign, Inc. $74.66 25.06 AMC

 

 

Friday October 23:

 

Economic: PMI Manufacturing Index – 9:45, Baker-Hughes Rig Count – 1:00.

 

International Economic: Germany PMI Composite Flash – 2:00 AM, EMU PMI Composite Flash – 4:00 AM.

 

Optionable Earnings:

Symbol Company Name Oct 16 Close IV30 B/A
AAL American Airlines Group Inc $44.46 37.77 BMO
BPOP Popular Inc $31.28 33.96 BMO
CFG Citizens Financial Group Inc $23.52 28.01 BMO
COG Cabot Oil & Gas Corporation $23.72 43.27 BMO
LEA Lear Corporation $116.05 27.95 BMO
LYB LyondellBasell Industries NV $93.40 35.38 BMO
RCL Royal Caribbean Cruises Ltd $90.96 33.34 BMO
SHPG Shire PLC (ADR) $206.05 37.71 BMO
STT State Street Corp $68.51 25.69 BMO
WHR Whirlpool Corporation $154.65 35.29 BMO

 

 

Monday October 26:

 

Economic: New House Sales – 10:00, Dallas Fed Manufacturing Survey – 10:30.

 

International Economic: No major announcements.

 

Other:   Richmond Federal Reserve Bank President Jeffrey Lacker speech on the economics of early childhood education, in Richmond – 12:00 PM.

 

Optionable Earnings:

Symbol Company Name Oct 16 Close IV30 B/A
CHKP Check Point Software Technologies Ltd. $79.72 26.67 BMO
LH Laboratory Corp. of America $115.38 23.40 BMO
SOHU Sohu.com Inc $47.26 47.84 BMO
CAKE Cheesecake Factory Inc $52.80 28.93 AMC
EW Edwards Lifesciences Corp $147.15 37.71 AMC
HIG Hartford Financial Services Group Inc $46.95 24.44 AMC
IDTI Integrated Device Technology Inc $23.07 46.42 AMC
KN Knowles Corp $21.30 64.92 AMC
RCII Rent-A-Center Inc $24.52 42.01 AMC
TWOU 2U Inc $23.69 69.50 AMC

 

 

 

 

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