In trading on Wednesday shares of Hospitality Properties Trust Symbol HPT crossed above their 200 day moving average of 29 73 changing hands as high as 29 90 per share Hospitality Properties Trust shares are currently trading up about 2 8 on the day The chart below shows the one
One of the most frequent types of questions I receive from investors involves the topic of year-to-date performance. Many investors are very interested in tracking how indexes have performed in the current year.
As shown in the two charts below, of the ten S&P Select Sector indexes, the top and bottom performers in terms of price index returns in 2017 (through November 7) were the S&P Technology Select Sector Index (IXT), which was up 32%, and the S&P Energy Select Sector Index (IXE), which was down 6%.
HISTORIC VOLATILITY IN 2017
So far in 2017, the averages of the daily 20-trading day historic volatilities (through September 7) were:
- 13.4 for the S&P Technology Select Sector Index (IXT);
- 9.8 for the S&P Energy Select Sector Index (IXE);
- 6.8 for the S&P 500 Index (SPX); and
- 3.2 for the Cboe S&P 500 PutWrite Index (PUT), an index that sells cash-secured SPX put options.
PLANS FOR OPTIONS ON SELECT SECTOR INDICES
Cboe Global Markets has announced plans to expand its suite of product offerings tied to S&P Dow Jones Indices with the planned launch of options on the ten S&P Select Sector Indices that comprise the S&P 500 Index, a key benchmark of the U.S. equities market.
- Options will be available on 10 sectors that comprise the S&P 500, pending regulatory approval.
- The new options are expected to hold particular market appeal for European investors interested in targeted exposure within key U.S. equity benchmarks.
- Further expands Cboe’s successful suite of products tied to S&P Dow Jones Indices, with trading and settlement features similar to Cboe’s S&P 500 options (SPX).
WEIGHTINGS FOR S&P SELECT SECTOR INDICES
The S&P Technology Select Sector Index (IXT) has the largest weighting of all the ten S&P Select Sector indexes.
EUROPEAN INVESTORs, UCITS, AND CASH-SETTLED INDEX OPTIONS
Cboe Select Sector Index options are designed to potentially be problem-solvers for European asset managers who want exposure to these U.S. index sectors, but cannot hold physical delivery exchange-traded product (ETP) options in their funds because of EU regulations around UCITS (Undertakings for the Collective Investment of Transferable Securities). The options on the Select Sector Indexes are designed to provide simple, straightforward market access to these key U.S. equity sectors for European investors.
For more information on the planned options on S&P Select Sector Indices, including links to more than 100 price charts, and a Fact Sheet with key options specifications, please visit www.cboe.com/Sectors.
On November 3 the Cboe Volatility Index® (VIX®) closed at 9.14, an all-time record low for both a daily and weekly closing value for the index.
While the news media often focuses on the spot VIX Index, volatility traders analyze the price movements of VIX futures. The prices for VIX futures at the close on November 3 ranged from 10.1 to 16.4.
In light of the fact that the VIX Index recently has been well below its long-term average of 19.4, some observers might question whether there might be too much complacency in the markets. However, it is worth noting that the Cboe SKEW Index usually has been well-above its long-term average of 118.6 in recent months. www.cboe.com/skew.
Investors can learn more about use of VIX futures and options at www.cboe.com/VIX and at upcoming Cboe Risk Management Conferences —
- Cboe RMC Asia. Dec. 5 – 6, 2017 at Conrad Hong Kong www.cboermcasia.com;
- Cboe RMC US. March 7 – 9, 2018 at Hyatt Regency Coconut Point, FL cboermcus.com;
- Cboe RMC Europe. Sept. 12 – 14, 2018 at Powerscourt Hotel in Enniskerry, Ireland www.cboermceurope.com.
The Dow Jones Industrial Average DJIA S amp P 500 Index SPX and Nasdaq Composite IXIC each closed at record highs today with the Dow and S amp P ending higher for an eighth straight week their longest weekly win streaks since 2013 and the IXIC making it six in a row
In trading on Monday shares of NutriSystem Inc Symbol NTRI crossed below their 200 day moving average of 50 52 changing hands as low as 50 20 per share NutriSystem Inc shares are currently trading off about 6 6 on the day The chart below shows the one year performance of NTRI
VIX finished the week lower, but notice the change for the standard first, second, and third month futures which was green for the week. VIX may have dropped at the end of the week, but the VIX futures are acting like the volatility players are not expecting the move lower to hold.
One trader took advantage of the volatility strength on Wednesday to get short volatility using Weeklys futures. With VIX around 12.90 and the Nov 8th Future at 13.00 there was a small buyer of the VIX Nov 8th 13 Puts at 1.50. They goal here is for VIX to move lower and November 8th settlement to be in line with what has been common lately, a 10 or even 9 handle. The break-even on this trade at expiration is 11.50 so if things go back to 2017 normal this may be a smart, well-timed fade of VIX moving up this week.
Of the four volatility indexes based on SPX option pricing, only VIX was lower last week. This is the second week where the longer dated indexes (VIX3M and VXMT) rose while VIX was lower.
Despite VIX dropping the long ETPs gained ground last week. This is a great lesson in what these products give you, exposure to VIX futures and both the November and December contracts rose slightly despite the drop in VIX.
Of note on the table below is the majority of green lines versus reddish lines. It’s been rare in 2017 that more volatility indexes rise than drop on a week over week basis.
On Wednesday VXX spent some time above 38 and when the popular ETN was around 38.50 someone came in and decided the move wouldn’t run to the low 40’s through the end of the week. Specifically there was a seller of the VXX Oct 27th 42 Calls for 0.51 who purchased the VXX Oct 27th 45 Calls for 0.26 and a credit of 0.25. The risk here is VXX over 45.00 and a loss of 2.75. However, there wasn’t much danger of this happening as VXX turned to the downside shortly after this trade.
There s been a lot of talk about volatility in stocks lately But today I want to focus on options volatility and what it means for the options investor So let s start off with a definition Volatility measures the rate at which a security moves up and down If a security is moving up
Investors in Intuit Inc Symbol INTU saw new options become available this week for the December 15th expiration At Stock Options Channel our YieldBoost formula has looked up and down the INTU options chain for the new December 15th contracts and identified one put and one call contract
VIX was higher last week, despite the S&P 500 hitting a record high for five days in a row. At low levels this sort of divergence between VIX and the S&P 500 isn’t usually much of a big deal. But I wonder if there may be more significance since VIX under 10 has become a bit more of a norm.
I love going through time and sale to see what sort of trading has been going on in VIX options and it’s a bonus when I find a trade structure that’s uncommon. This leads me to this week’s trade which combined a synthetic long VIX position with a long VIX put. On Thursday, there was a buyer of the VIX Oct 25th 12 Calls at 0.36 who sold the VIX Oct 25th 12 Puts at 1.52 which is a synthetic long position in VIX with a price of 10.84. Since it’s VIX we can think of it as a synthetic long Oct 25th VIX Futures position (it appears the Oct 25th VIX futures were trading at 10.85 at the time). To round out the trade they purchased the VIX Oct 25th 11.50 Puts for 1.09. The results a payoff that looks like the diagram on expiration date.
If the chart above looks familiar it is because it is a long call. With three legs a trader basically replicated a long 11.50 Call at a cost of 0.43. The market for those options was 0.45 x 0.50 at the time of the trade so they did a little bit better by executing the spread as opposed to buying the call options.
The short term volatility indexes (VXST and VIX) were up a bit last week as the S&P 500 set multiple all-time closing record highs last week. VIX3M (formerly VXV) and VXMT were both up slightly resulting the rare ‘term-structure twist’. It’s really not that rare, I just had a nature documentary voice in my head as I typed that.
The table below has few surprises (beyond VXST and VIX higher). TYVIX heading to higher levels is a bit of a head scratcher until I notice the December FOMC meeting is sneaking up on us. It’s difficult to think the December meeting is around the corner when it’s 75 degrees in Chicago as I type this. Finally, worth noting is SKEW rallying to near all-time highs as the S&P 500 did the same.
Across the volatility universe most indexes were lower. IBM and Goldman Sachs volatility on the bottom of the table is a great reminder than not all volatility markets are the same. Looking at the top end of the chart the words, ‘mixed bag’ popped into my mind.
As mentioned already, we experienced a short-lived volatility spike Thursday morning, this sent me looking for traders using options on volatility linked ETPs to take the other side of this move. With VXX up around 35.60 a trader came in and sold the VXX Oct 20th 34.00 Calls at 1.68 and purchased the VXX Oct 20th 36.50 Calls for 0.31 and a net credit of 1.37. The payout at expiration (Friday’s close) shows up below.
This turned out to be a well-timed fade of the volatility move that lasted about 45 minutes. VXX finished the week at 33.79, 0.21 under the short call strike of 34.00 which places it a perfect place for this bear call spread as both options expired with no value.
The 160 Dow Jones Industrial Average DJIA S amp P 500 Index SPX and the 160 Nasdaq Composite IXIC each touched record highs today as a new budget plan passed 160 by the Senate fueled optimism about tax reform 160 Traders also considered President Trump s comments