“Chance favors the prepared mind.” — Louis Pasteur
By Frank Fahey
“Sometimes a pessimist is only an optimist with extra information.” ― Idries Shah
“Reality is that which, when you stop believing in it, doesn’t go away.” Philip K. Dick
“The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton
The Dow was down for the fourth straight week. While other major indexes showed modest increases. Stock market pundits were wearing their bear hats this week. The two “facts’ highlighted by various analysts. “Fact” #1: A bull market has not gone a full year without making a new high since Valentine’s Day 1995. “Fact” #2: If the Dow does not gain 800 points within the next 10 days, it will be the longest stretch without a new high since January 28, 1985. I do not need these “fact” to increase my wariness. Thirty years of professional trading experience has permanently left my wariness at 11 on a scale of 1 to 10.
The release of the minutes of the FOMC April meeting showed members might raise interest rates as soon as June if the economy cooperated – specifically employment and inflation. The April Consumer Price Index was released on Tuesday. The CPI showed the largest increase in consumer prices since February of 2013 and the fifth consecutive month of annual growth above 2%. Per the minutes, “Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation marking progress toward the Committee’s 2.0% objective, then it would likely be appropriate for the Committee to increase the target range for the federal funds rate in June.”
Here is an overview of the market behavior last week:
Index
20-May
Weekly Change
% Weekly
2015 YTD
Volatility of Index
Dow Jones Industrials (DJIA)
17,500.94
(34.38)
-0.20%
0.44%
14.48% (VXD)
S&P 500 (SPX)
2,052.32
5.71
0.28%
0.41%
15.20% (VIX)
NASDAQ 100 (NDX)
4,360.13
34.02
0.79%
-5.16%
16.40% (VXN)
Russell 2000 (RUT)
1,111.15
9.48
0.86%
-2.01%
18.40% (RVX)
S&P 100 (OEX)
909.15
1.28
0.14%
-0.25%
15.26% (VXO)
Crude Oil (CL M6)
48.48
2.11
4.55%
30.78%
40.17%(OVX)
Data Source: OptionVue7
The VIX and related products showed little movement this week, The exceptions were the CBOE Short-term Volatility Index (VXST) and the VIX of the VIX (VVIX). The perceived inevitability of a June interest rate increase, combined with an upcoming holiday, may have impacted the perception of volatility for the VIX in the short-term.
Three 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 20 at $0..15, $1.45 and $0.65. The trade is currently up $0.15 or a gain (before commissions) of over $1,500,000. 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 wonder what commission a customer of this size has to pay? I will continue to follow the position.
Here is an overview of last week for the VIX and related products:
Indexes
Ticker
20-May
13-May
Change
% Change
CBOE Volatility Index
VIX
15.20
15.04
0.16
1.06%
VIX June Future (6/15/2016)
VXM6
17.320
18.075
(0.755)
-4.18%
VIX July Future (7/20/2016)
VXN6
18.950
19.225
(0.275)
-1.43%
VIX August Future (8/17/2016)
VXQ6
19.575
19.675
(0.100)
-0.51%
CBOE Short-term Volatility Index
VXST
12.73
14.15
(1.42)
-10.04%
CBOE 3 Month Volatility Index
VXV
18.05
18.25
(0.20)
-1.10%
CBOE Mid-term Volatility Index (6 month)
VXMT
20.32
20.25
0.07
0.35%
VIX of VIX
VVIX
85.46
94.00
(8.54)
-9.09%
CBOE SKEW Index
SKEW
125.81
121.46
4.35
3.58%
Long VIX ETP’s
iPath S&P 500 VIX Short Term Futures ETN
VXX
15.10
15.67
(0.57)
-3.64%
ProShares VIX Short Term Futures ETF
VIXY
9.99
10.38
(0.39)
-3.76%
iPath S&P 500 VIX Mid-Tem Futures ETN
VXZ
11.18
11.22
(0.04)
-0.36%
Inverse VIX ETP’s
ProShares Short VIX Short Term Future ETF
SVXY
55.88
53.93
1.95
3.62%
Daily Inverse VIX Short Term ETN
XIV
28.55
27.66
0.89
3.22%
Data Source: OptionVue7
The focus will be on the Fed this week. Seven speeches by members of the Fed are scheduled for this week. On Monday three regional Fed presidents will be speaking. The week culminates with a speech on Friday by Janet Yellen, Chair of the Fed Board of Governors. Economic reports will focus on housing and manufacturing. The holiday shortened week of May 31 to June 3 will be highlighted by “employment week.”
Earnings reports have are nearly none existent over the next two weeks. The earnings highlights this week for widely held and actively traded stocks are Computer Sciences, Toll Brothers, Valspar, Autozone, Intuit, Best Buy,Tiffany & Co, HP, Guess?, Williams-Sonoma, Sanderson Farms, Dollar Tree, GameStop, Deckers Outdoor, Dollar General, Ulta Salon and Big Lots. 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 20 Close
IV30
B/A
DATE
OPT VOL
QIHU
Qihoo 360 Technology Co Ltd
$70.85
30.19
AMC
31-May
10859
WDAY
Workday Inc
$73.58
51.42
AMC
31-May
3641
FIVE
Five Below Inc
$38.76
50.31
AMC
1-Jun
1694
KORS
Michael Kors Holdings Ltd
$40.70
59.40
BMO
1-Jun
7460
AMBA
Ambarella Inc
$37.67
57.82
AMC
2-Jun
6224
AVGO
Broadcom Ltd
$142.74
41.58
AMC
2-Jun
7117
LULU
Lululemon Athletica inc.
$61.10
53.38
AMC
7-Jun
11149
RHT
Red Hat Inc
$72.44
26.13
AMC
15-Jun
2712
KMX
CarMax, Inc
$51.32
30.51
BMO
17-Jun
4338
Data Source: OptionVue7
Monday May 23:
Economic: PMI Manufacturing Index Flash – 9:45.
International Economic: Japan All Industry Index – 1:30AM, EMU/EC Consumer confidence Flash – 10:00AM..
Other: St. Louis Federal Reserve Bank President James Bullard speech on the economy and monetary policy in Beijing followed by media availability – 5:30AM, San Francisco Federal Reserve Bank President John C. Williams speech on monetary policy in New York followed by media availability – 8:00am, Philadelphia Fed President Patrick Harker will speak to the Philadelphia Council for Business Economics followed by press availability in Philadelphia – 6:30PM.
Earnings: None meeting criteria.
Tuesday May 24:
Economic: Redbook – 8:55, New Home Sales – 10:00, Richmond Fed Manufacturing Index – 10:00.
International Economic: Germany GDP – 5:00.
Earnings:
Symbol
Company Name
May 20 Close
IV30
B/A
OPT VOL
BBY
Best Buy Co Inc
$31.53
47.26
BMO
8500
TOL
Toll Brothers Inc
$26.75
33.21
BMO
1887
YY
YY Inc (ADR)
$44.45
53.02
AMC
3110
Wednesday May 25:
Economic: MBA Mortgage Applications – 7:00, International Trade in Goods – 8:30, EIA Petroleum Status Report – 10:30, FHFA House Price Index – 9:00, PM I Services Flash = 9:45.
International Economic: No Major Announcements.
Other:Dallas Federal Reserve Bank President Robert Kaplan will speak in a moderated question and answer session in Houston – 1:00PM
Earnings:
Symbol
Company Name
May 20 Close
IV30
B/A
OPT VOL
COST
Costco Wholesale Corporation
$142.70
22.53
BMO
9536
TIF
Tiffany & Co.
$63.28
44.20
BMO
5169
WUBA
58.com Inc (ADR)
$49.01
50.02
BMO
1440
CTRP
Ctrip.com International, Ltd. (ADR)
$42.67
49.32
AMC
11180
NTAP
NetApp Inc.
$23.40
39.45
AMC
1740
PVH
PVH Corp
$86.42
49.48
AMC
2942
WSM
Williams-Sonoma, Inc.
$49.12
50.61
AMC
3539
Thursday May 26:
Economic: Weekly Jobless Claims – 8:30, Durable Goods Orders – 8:30, Bloomberg Consumer Comfort Index – 9:45, Pending Home Sale Index – 10:00, EIA Natural Gas Report – 10:30, Kansas City Manufacturing Index – 11:00.
International Economic: Great Britain GDP – 4:30AM, Japan CPI – 7:30PM.
Other: St. Louis Federal Reserve Bank President James Bullard will give a speech on the economy and monetary policy followed by media availability in Singapore – 5:15AM, Federal Reserve Gov. Jerome Powell speech on the economy and monetary policy, in Washington – 12:15PM.
Other: Federal Reserve Chair Janet Yellen will receive an award from the Radcliffe Institute for Advanced Study at Harvard University, and speak with Harvard Professor Gregory Mankiw – 10:30AM.
Earnings:
Symbol
Company Name
May 20 Close
IV30
B/A
OPT VOL
SIG
Signet Jewelers Ltd.
$108.67
51.47
DMT
3575
ANF
Abercrombie & Fitch Co.
$23.88
64.30
BMO
5777
BURL
Burlington Stores Inc
$53.32
47.30
BMO
1295
DG
Dollar General Corp.
$82.00
31.65
BMO
3905
DLTR
Dollar Tree, Inc.
$76.91
37.07
BMO
4457
GME
GameStop Corp.
$28.55
48.35
BMO
7310
DECK
Deckers Outdoor Corp
$49.42
53.06
AMC
1111
PANW
Palo Alto Networks Inc
$139.21
51.52
AMC
6889
SPLK
Splunk Inc
$50.51
57.40
AMC
2907
ULTA
Ulta Salon, Cosmetics & Fragrance,
$207.89
43.80
AMC
4224
Monday May 30:
US Holiday – Memorial Day
All Markets Closed.
International Economic: France GDP – 1:30Am, Germany CPI – 8:00AM, Japan Household Spending and Unemployment Rate – 7:30PM.
Earnings: None meeting criteria.
Tuesday May 31:
Economic: Personal Income and Outlays – 8:30, S&P Case-Shiller HPI – 9:00, Chicago PMI – 9:45, Consumer Confidence – 10:00, Sate Street Investor Confidence Index – 10:00, Dallas Fed Manufacturing Survey – 10:30, Farm Prices – 3:00.
International Economic: Germany Retail Sales – 2:00AM, France CPI and PPI – 2:45AM, Germany Unemployment Rate – 3:55AM, EMU Unemployment Rate – 5:00AM, China PMI Manufacturing Index – 9:45PM.
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Futures + Options News
The Prepared Mind: May 23, 2016
“Chance favors the prepared mind.” — Louis Pasteur
By Frank Fahey
“Sometimes a pessimist is only an optimist with extra information.” ― Idries Shah
“Reality is that which, when you stop believing in it, doesn’t go away.” Philip K. Dick
“The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton
The Dow was down for the fourth straight week. While other major indexes showed modest increases. Stock market pundits were wearing their bear hats this week. The two “facts’ highlighted by various analysts. “Fact” #1: A bull market has not gone a full year without making a new high since Valentine’s Day 1995. “Fact” #2: If the Dow does not gain 800 points within the next 10 days, it will be the longest stretch without a new high since January 28, 1985. I do not need these “fact” to increase my wariness. Thirty years of professional trading experience has permanently left my wariness at 11 on a scale of 1 to 10.
The release of the minutes of the FOMC April meeting showed members might raise interest rates as soon as June if the economy cooperated – specifically employment and inflation. The April Consumer Price Index was released on Tuesday. The CPI showed the largest increase in consumer prices since February of 2013 and the fifth consecutive month of annual growth above 2%. Per the minutes, “Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation marking progress toward the Committee’s 2.0% objective, then it would likely be appropriate for the Committee to increase the target range for the federal funds rate in June.”
Here is an overview of the market behavior last week:
Data Source: OptionVue7
The VIX and related products showed little movement this week, The exceptions were the CBOE Short-term Volatility Index (VXST) and the VIX of the VIX (VVIX). The perceived inevitability of a June interest rate increase, combined with an upcoming holiday, may have impacted the perception of volatility for the VIX in the short-term.
Three 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 20 at $0..15, $1.45 and $0.65. The trade is currently up $0.15 or a gain (before commissions) of over $1,500,000. 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 wonder what commission a customer of this size has to pay? I will continue to follow the position.
Here is an overview of last week for the VIX and related products:
Data Source: OptionVue7
The focus will be on the Fed this week. Seven speeches by members of the Fed are scheduled for this week. On Monday three regional Fed presidents will be speaking. The week culminates with a speech on Friday by Janet Yellen, Chair of the Fed Board of Governors. Economic reports will focus on housing and manufacturing. The holiday shortened week of May 31 to June 3 will be highlighted by “employment week.”
Earnings reports have are nearly none existent over the next two weeks. The earnings highlights this week for widely held and actively traded stocks are Computer Sciences, Toll Brothers, Valspar, Autozone, Intuit, Best Buy,Tiffany & Co, HP, Guess?, Williams-Sonoma, Sanderson Farms, Dollar Tree, GameStop, Deckers Outdoor, Dollar General, Ulta Salon and Big Lots. 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 23:
Economic: PMI Manufacturing Index Flash – 9:45.
International Economic: Japan All Industry Index – 1:30AM, EMU/EC Consumer confidence Flash – 10:00AM..
Other: St. Louis Federal Reserve Bank President James Bullard speech on the economy and monetary policy in Beijing followed by media availability – 5:30AM, San Francisco Federal Reserve Bank President John C. Williams speech on monetary policy in New York followed by media availability – 8:00am, Philadelphia Fed President Patrick Harker will speak to the Philadelphia Council for Business Economics followed by press availability in Philadelphia – 6:30PM.
Earnings: None meeting criteria.
Tuesday May 24:
Economic: Redbook – 8:55, New Home Sales – 10:00, Richmond Fed Manufacturing Index – 10:00.
International Economic: Germany GDP – 5:00.
Earnings:
Wednesday May 25:
Economic: MBA Mortgage Applications – 7:00, International Trade in Goods – 8:30, EIA Petroleum Status Report – 10:30, FHFA House Price Index – 9:00, PM I Services Flash = 9:45.
International Economic: No Major Announcements.
Other: Dallas Federal Reserve Bank President Robert Kaplan will speak in a moderated question and answer session in Houston – 1:00PM
Earnings:
Thursday May 26:
Economic: Weekly Jobless Claims – 8:30, Durable Goods Orders – 8:30, Bloomberg Consumer Comfort Index – 9:45, Pending Home Sale Index – 10:00, EIA Natural Gas Report – 10:30, Kansas City Manufacturing Index – 11:00.
International Economic: Great Britain GDP – 4:30AM, Japan CPI – 7:30PM.
Other: St. Louis Federal Reserve Bank President James Bullard will give a speech on the economy and monetary policy followed by media availability in Singapore – 5:15AM, Federal Reserve Gov. Jerome Powell speech on the economy and monetary policy, in Washington – 12:15PM.
Earnings:
Friday May 27:
Economic: GDP – 8:30, Corporate Profits – 8:30, Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.
International Economic: No Major Announcements.
Other: Federal Reserve Chair Janet Yellen will receive an award from the Radcliffe Institute for Advanced Study at Harvard University, and speak with Harvard Professor Gregory Mankiw – 10:30AM.
Earnings:
Monday May 30:
US Holiday – Memorial Day
All Markets Closed.
International Economic: France GDP – 1:30Am, Germany CPI – 8:00AM, Japan Household Spending and Unemployment Rate – 7:30PM.
Earnings: None meeting criteria.
Tuesday May 31:
Economic: Personal Income and Outlays – 8:30, S&P Case-Shiller HPI – 9:00, Chicago PMI – 9:45, Consumer Confidence – 10:00, Sate Street Investor Confidence Index – 10:00, Dallas Fed Manufacturing Survey – 10:30, Farm Prices – 3:00.
International Economic: Germany Retail Sales – 2:00AM, France CPI and PPI – 2:45AM, Germany Unemployment Rate – 3:55AM, EMU Unemployment Rate – 5:00AM, China PMI Manufacturing Index – 9:45PM.
Earnings: