“Chance favors the prepared mind.” — Louis Pasteur
By Frank Fahey
“Chance favors the Prepared Mind.” – Louis Pasteur
“Sometimes a pessimist is only an optimist with extra information.” ― Idries Shah
“In the Information Age, the first step to sanity is FILTERING. Filter the information: extract for knowledge.” – Marc Stiegler
“The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton
There was cognitive dissonance in the market with the Commerce Department announcing a 1.3% increase in April retail sales (beating consensus estimates by nearly 1%) and with several big brick and mortar retailers announcing disappointing first quarter numbers. Almost every group in the retail sector showed gains. Several factors pushed and pulled the market last week. Estimates of second quarter range as high as 3%. Early May consumer sentiment rose sharply. The dollar was stronger pushing large caps lower. Analysts opined the week’s news increased the odds of a rate hike at June’s FOMC meeting.. The net effect on the markets was a sell-off of 0.5% to a bit over 1% in the major indexes.
Here is an overview of the market behavior last week:
Index
13-May
Weekly Change
% Weekly
2015 YTD
Volatility of Index
Dow Jones Industrials (DJIA)
17,535.32
(205.31)
-1.16%
0.63%
15.35% (VXD)
S&P 500 (SPX)
2,046.61
(10.53)
-0.51%
0.13%
15.04% (VIX)
NASDAQ 100 (NDX)
4,326.11
(2.60)
-0.06%
-5.90%
17.10% (VXN)
Russell 2000 (RUT)
1,101.67
(13.84)
-1.24%
-2.84%
19.07% (RVX)
S&P 100 (OEX)
907.87
(4.23)
-0.46%
-0.39%
15.82% (VXO)
Crude Oil (CL M6)
46.37
1.81
4.06%
25.09%
41.57%(OVX)
Data Source: OptionVue7
The VIX is holding steady despite the downward move in the S&P500. This is a continuation of the relationship first exhibited two weeks ago when the VIX dropped despite the SPX falling in price. VIX futures were down. e VIX futures curve is relatively flat between July and August. Pundits are conjecturing the Fed will be a non-factor between the summer conventions and November’s election. The net of such inaction would be calm for the financial markets. However, discussion about Brexit has been muted. Great Britain is holding a referendum is being held on Thursday, 23 June to decide whether Britain should leave or remain in the European Union. Markets do not like the unknown. I expect volatility to increase as the referendum date approaches.
Two weeks ago, I told you about a massive VIX 1X2 spread (Buy 1 contract at a strike and sell 2 contracts at a different strike.) The July spread was a buy of 100,063 VIX Jul 23 Calls at 1.50 and the sale of 200,126 July 30 Calls at 0.75 for even money, The VIX July 23/30 1X2 call spread closed on Friday May 13 at $0.09, $1..75 and $0.83. The trade is currently up $0.09 or a gain of over $900,000. This trade appears to be part of an ongoing campaign. I do not know if this is a directional trade or a hedge of a long equity position. I will continue to follow the position.
Here is today’s video blog:
Here is an overview of last week for the VIX and related products:
Indexes
Ticker
13-May
6-May
Change
% Change
CBOE Volatility Index
VIX
15.04
14.72
0.32
2.17%
VIX May Future (5/18/2016)
VXK6
15.875
15.725
0.150
0.95%
VIX June Future (6/15/2016)
VXM6
18.075
18.325
(0.250)
-1.36%
VIX July Future (7/20/2016)
VXN6
19.225
19.475
(0.250)
-1.28%
VIX August Future (8/17/2016)
VXQ6
19.675
19.875
(0.200)
-1.01%
CBOE Short-term Volatility Index
VXST
14.15
13.38
0.77
5.75%
CBOE 3 Month Volatility Index
VXV
18.25
18.27
(0.02)
-0.11%
CBOE Mid-term Volatility Index (6 month)
VXMT
20.25
20.40
(0.15)
-0.74%
VIX of VIX
VVIX
94.00
88.86
5.14
5.78%
CBOE SKEW Index
SKEW
121.46
120.82
0.64
0.53%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN
VXX
15.67
15.97
(0.30)
-1.88%
ProShares VIX Short Term Futures ETF
VIXY
10.38
10.56
(0.18)
-1.70%
iPath S&P 500 VIX Mid-Tem Futures ETN
VXZ
11.22
11.30
(0.08)
-0.71%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF
SVXY
53.93
53.56
0.37
0.69%
Daily Inverse VIX Short Term ETN
XIV
27.66
27.43
0.23
0.84%
Data Source: OptionVue7
Manufacturing and housing are the major themes with this coming week with reports on housing starts, industrial production, and existing home sales. The CPI will be released on Tuesday. Analysts expect it to be higher due to increases in oil prices, and strengthening of the housing sector. The highlight of the week will be the release on Wednesday of the minutes from the April FOMC meeting. Positive reports are expected for the Thursday’s Philadelphia Fed Business Outlook Survey and the release of the Existing Home Sales Report on Friday.
Earnings reports have entered the doldrums between two earnings’ seasons. Major retailers will be announcing earnings this week. The first quarter earnings season winding down The The earnings highlights this week for widely held and actively traded stocks are Akorn, TJX Co., Home Depot, Synopsis. Staples. Hormel Foods, L Brands, Analog Devices, Urban Outfitters, Target, Williams-Sonoma, American Eagle Outfitters. Lowe’s, salesforce.com, Ross Stores, Gap, Dollar Tree, Advance Auto Parts, Wal-Mart, Autodesk, Toro, Dicks Sporting Goods, Footlocker, and Deere & Co. Announcement dates and times can and do change. It is your responsibility to confirm these times.
The following table will assist you in preparing for the upcoming earnings announcement cycle. OptionVue7 has the ability to identify stocks 30 days out with a new enhanced Earnings Search feature. I have done a quick search 7 to 35 days forward for candidates for double calendars. I generally put on earnings double calendars anywhere from one week to thirty days in advance of the announcement. I usually take the calendars off at the last possible moments prior to the announcement. I make the final decision exit prior to announcement or hold through the announcement on the last trading day prior to announcement.
I am continually reminded by the importance of liquidity in trading options. A lack of liquidity in options is enough to make me walk away from a trade. I have added option volume in to my earnings announcement tables. I use the daily volume as an indicator of liquidity. In addition, I have increase the minimum level of average daily option volume from 300 to 1,000 for these reports.
Here are the results of my initial scan for double calendar candidates. You should further filter any of the stocks with your own risk/reward criteria. This scan is available as a PDF. Contact me a fjfahey@gmail.com if you would like it sent to you or if you would like to be removed from the distribution list.
Symbol
Company Name
May 13 Close
IV30
B/A
DATE
OPT VOL
YY
YY Inc (ADR)
$45.07
57.51
AMC
24-May
2991
WUBA
58.com Inc (ADR)
$50.43
50.29
BMO
25-May
1549
TIF
Tiffany & Co.
$66.37
38.07
BMO
25-May
4739
PVH
PVH Corp
$84.16
45.39
AMC
25-May
3082
DG
Dollar General Corp.
$83.69
30.83
BMO
26-May
3884
ULTA
Ulta Salon, Cosmetics & Fragrance
$207.43
41.52
AMC
13-Jan
4549
SPLK
Splunk Inc
$47.04
58.57
AMC
13-Jan
3011
SIG
Signet Jewelers Ltd.
$104.10
49.19
DMT
13-Jan
3484
DECK
Deckers Outdoor Corp
$53.27
51.37
AMC
13-Jan
1171
PANW
Palo Alto Networks Inc
$129.53
59.14
AMC
13-Jan
6904
WDAY
Workday Inc
$71.05
53.17
AMC
31-May
3584
KORS
Michael Kors Holdings Ltd
$43.79
62.10
BMO
1-Jun
7068
FIVE
Five Below Inc
$38.86
48.44
AMC
1-Jun
1567
AVGO
Broadcom Ltd
$141.04
41.55
AMC
2-Jun
7226
AMBA
Ambarella Inc
$35.38
60.59
AMC
2-Jun
6805
LULU
Lululemon Athletica inc.
$61.62
46.48
AMC
7-Jun
10932
BURL
Burlington Stores Inc
$53.51
42.82
BMO
7-Jun
1005
RH
Restoration Hardware Holdings Inc
$35.04
67.57
AMC
9-Jun
3995
Data Source: OptionVue7
Monday May 16:
Economic: Empire State Manufacturing Survey – 8:30, Housing Market Index – 10:00.
International Economic: No major announcements.
Other: Minneapolis Federal Reserve Bank President Neel Kashkari will host a town hall about too big to fail issues in Minneapolis – 7:00PM.
International Economic: China Producer and Import Price Index – 3:17Am, EMU Merchandise Trade – 5:00AM, Japan GFP – 7:50PM.
Other: San Francisco Federal Reserve Bank President John Williams and Atlanta Federal Reserve Bank President Dennis Lockhart will speak at a Politico event in Washington DC – 12:00PM, Dallas Federal Reserve Bank President Robert Kaplan is speaking in a moderated Q&A session followed by media availability at a community forum in Midland, Texas – 1:15PM, Last day to trade May VIX futures and options.
Earnings:
Symbol
Company Name
May 13 Close
IV30
B/A
AVGVOL
VOD
Vodafone Group Plc (ADR)
$32.84
31.28
DMT
2432
HD
Home Depot Inc
$134.19
24.05
BMO
20258
TJX
TJX Companies Inc
$74.28
29.55
BMO
2389
Wednesday May 18:
Economic: MBA Mortgage Applications – 7:00, Atlanta Fed Business Inflation – 9:15, EIA Petroleum Status Report – 10:30.
International Economic: Japan Machine Orders – 7:50PM.
Other: FOMC Minutes – 2:00PM.
Earnings:
Symbol
Company Name
May 13 Close
IV30
B/A
AVGVOL
HRL
Hormel Foods Corp
$40.21
27.86
BMO
1363
LOW
Lowe’s Companies, Inc.
$75.40
26.00
BMO
8660
TGT
Target Corporation
$75.60
29.59
BMO
14171
URBN
Urban Outfitters, Inc.
$26.90
55.97
BMO
1799
ADI
Analog Devices, Inc.
$54.90
30.13
AMC
1439
CRM
salesforce.com, inc.
$75.89
43.41
AMC
15732
CSCO
Cisco Systems, Inc.
$26.67
29.50
AMC
49035
CTRP
Ctrip.com International, Ltd. (ADR)
$43.08
50.51
AMC
11314
LB
L Brands Inc
$67.42
31.52
AMC
3313
Thursday May 19
Economic: Weekly Jobless Claims – 8:30, Philadelphia Fed Business Outlook Survey – 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: EMU European Central Bank Minutes – 7:30AM.
Other: New York Federal Reserve Bank President William Dudley will speak on trends at NY Fed event followed by Q&A session in New York- 10:30AM.
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Futures + Options News
The Prepared Mind: May 16, 2016
“Chance favors the prepared mind.” — Louis Pasteur
By Frank Fahey
“Chance favors the Prepared Mind.” – Louis Pasteur
“Sometimes a pessimist is only an optimist with extra information.” ― Idries Shah
“In the Information Age, the first step to sanity is FILTERING. Filter the information: extract for knowledge.” – Marc Stiegler
“The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton
There was cognitive dissonance in the market with the Commerce Department announcing a 1.3% increase in April retail sales (beating consensus estimates by nearly 1%) and with several big brick and mortar retailers announcing disappointing first quarter numbers. Almost every group in the retail sector showed gains. Several factors pushed and pulled the market last week. Estimates of second quarter range as high as 3%. Early May consumer sentiment rose sharply. The dollar was stronger pushing large caps lower. Analysts opined the week’s news increased the odds of a rate hike at June’s FOMC meeting.. The net effect on the markets was a sell-off of 0.5% to a bit over 1% in the major indexes.
Here is an overview of the market behavior last week:
Data Source: OptionVue7
The VIX is holding steady despite the downward move in the S&P500. This is a continuation of the relationship first exhibited two weeks ago when the VIX dropped despite the SPX falling in price. VIX futures were down. e VIX futures curve is relatively flat between July and August. Pundits are conjecturing the Fed will be a non-factor between the summer conventions and November’s election. The net of such inaction would be calm for the financial markets. However, discussion about Brexit has been muted. Great Britain is holding a referendum is being held on Thursday, 23 June to decide whether Britain should leave or remain in the European Union. Markets do not like the unknown. I expect volatility to increase as the referendum date approaches.
Two weeks ago, I told you about a massive VIX 1X2 spread (Buy 1 contract at a strike and sell 2 contracts at a different strike.) The July spread was a buy of 100,063 VIX Jul 23 Calls at 1.50 and the sale of 200,126 July 30 Calls at 0.75 for even money, The VIX July 23/30 1X2 call spread closed on Friday May 13 at $0.09, $1..75 and $0.83. The trade is currently up $0.09 or a gain of over $900,000. This trade appears to be part of an ongoing campaign. I do not know if this is a directional trade or a hedge of a long equity position. I will continue to follow the position.
Here is today’s video blog:
Here is an overview of last week for the VIX and related products:
Data Source: OptionVue7
Manufacturing and housing are the major themes with this coming week with reports on housing starts, industrial production, and existing home sales. The CPI will be released on Tuesday. Analysts expect it to be higher due to increases in oil prices, and strengthening of the housing sector. The highlight of the week will be the release on Wednesday of the minutes from the April FOMC meeting. Positive reports are expected for the Thursday’s Philadelphia Fed Business Outlook Survey and the release of the Existing Home Sales Report on Friday.
Earnings reports have entered the doldrums between two earnings’ seasons. Major retailers will be announcing earnings this week. The first quarter earnings season winding down The The earnings highlights this week for widely held and actively traded stocks are Akorn, TJX Co., Home Depot, Synopsis. Staples. Hormel Foods, L Brands, Analog Devices, Urban Outfitters, Target, Williams-Sonoma, American Eagle Outfitters. Lowe’s, salesforce.com, Ross Stores, Gap, Dollar Tree, Advance Auto Parts, Wal-Mart, Autodesk, Toro, Dicks Sporting Goods, Footlocker, and Deere & Co. Announcement dates and times can and do change. It is your responsibility to confirm these times.
The following table will assist you in preparing for the upcoming earnings announcement cycle. OptionVue7 has the ability to identify stocks 30 days out with a new enhanced Earnings Search feature. I have done a quick search 7 to 35 days forward for candidates for double calendars. I generally put on earnings double calendars anywhere from one week to thirty days in advance of the announcement. I usually take the calendars off at the last possible moments prior to the announcement. I make the final decision exit prior to announcement or hold through the announcement on the last trading day prior to announcement.
I am continually reminded by the importance of liquidity in trading options. A lack of liquidity in options is enough to make me walk away from a trade. I have added option volume in to my earnings announcement tables. I use the daily volume as an indicator of liquidity. In addition, I have increase the minimum level of average daily option volume from 300 to 1,000 for these reports.
Here are the results of my initial scan for double calendar candidates. You should further filter any of the stocks with your own risk/reward criteria. This scan is available as a PDF. Contact me a fjfahey@gmail.com if you would like it sent to you or if you would like to be removed from the distribution list.
Data Source: OptionVue7
Monday May 16:
Economic: Empire State Manufacturing Survey – 8:30, Housing Market Index – 10:00.
International Economic: No major announcements.
Other: Minneapolis Federal Reserve Bank President Neel Kashkari will host a town hall about too big to fail issues in Minneapolis – 7:00PM.
Earnings:
Tuesday May 17:
Economic: Consumer Price Index – 9:30, Housing Starts – 8:30, Redbook – 8:55, Industrial Production – 9:15, E-Commerce Retail Sales – 10:00.
International Economic: China Producer and Import Price Index – 3:17Am, EMU Merchandise Trade – 5:00AM, Japan GFP – 7:50PM.
Other: San Francisco Federal Reserve Bank President John Williams and Atlanta Federal Reserve Bank President Dennis Lockhart will speak at a Politico event in Washington DC – 12:00PM, Dallas Federal Reserve Bank President Robert Kaplan is speaking in a moderated Q&A session followed by media availability at a community forum in Midland, Texas – 1:15PM, Last day to trade May VIX futures and options.
Earnings:
Wednesday May 18:
Economic: MBA Mortgage Applications – 7:00, Atlanta Fed Business Inflation – 9:15, EIA Petroleum Status Report – 10:30.
International Economic: Japan Machine Orders – 7:50PM.
Other: FOMC Minutes – 2:00PM.
Earnings:
Thursday May 19
Economic: Weekly Jobless Claims – 8:30, Philadelphia Fed Business Outlook Survey – 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: EMU European Central Bank Minutes – 7:30AM.
Other: New York Federal Reserve Bank President William Dudley will speak on trends at NY Fed event followed by Q&A session in New York- 10:30AM.
Earnings:
Friday May 20:
Economic: Existing Home Sales – 10:00, Baker Hughes Rig Count – 1:00.
International Economic: Germany PPI – 2:00AM, Great Britain Industrial Trends Survey – 6:00AM.
Other: May Options Expiration – Last day to trade expring standard equity, ETF, ETN options and PM-settled index options.
Earnings:
Monday May 23:
Economic: No major announcements
International Economic: No major announcements.
Earnings: None meeting criteria.