Author: Andrew Keene
Unusual Option Activity Report 1.22.2013
Paper bought 4800 PSX Feb 60 Calls for $.85 when stock was trading $54.52
Paper bought 8559 APC May 90 Calls for $1.40 (2.0 times usual volume) when stock was trading $78.36
Paper sold 4825 PENN Feb 46 Puts for $.35 (21.4 times usual volume) when stock was trading $48.92
Paper bought 3586 Feb 37.5 Calls for $.75 (5.5 times usual volume) when stock was trading $36.33
Robert Gloss Discusses His Delta Earnings Play on Bloomberg TV 1.18.2013
Pregame GOOG Earnings from Every Angle 1.22.2013
Last quarter GOOG’s earnings were leaked. This lead to unsure and volatile action, price’s reaction to this news was net bearish. Investors are hoping this doesn’t happen again. Of the last nine observations, excluding last quarter timing error, post EPS activity is mixed. In most of the sample set, six of the nine observations, GOOG gapped and pinned on expiration at a large round number. In the other observations, GOOG gapped, but then filled or reversed into said gap.
GOOG was around the $750 level before last quarter’s report. This report proved to be the catalyst for further downside action. After the report, GOOG shares came down to test the 200-day moving average. On this day specifically, shares formed a bottoming tail hammer and the following day printed a nice confirmation bar…shares have been in rally mode since.
The ATM (at the money) weekly $705 straddle (lifting the offer) is at about $42.00 (5.9% of stock). It is easy to calculate break evens on the straddle. At last check the stock was around $705; $747.00 & $663.00 are the respective upper and lower breakeven. Straddle traders need to be aware of fast weekly time decay and the IV crush post earnings. Implied volatility (IV) is a measure of risk, supply and demand, relative price, and an input into theoretical models for options.
S&P Emini Pivot points for 1.22.2013
Apple & Google Pivot Points for 1.22.2013
S&P Emini Pivot points for 1.18.2013
Apple & Google Pivot Points for 1.18.2013
CBOE
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Andrew Keene was an independent equity options trader on the Chicago Board Options Exchange for 11 years. He spent most of that time as a market maker in over 125 stocks, including Apple, General Electric, Goldman Sachs, and Yahoo. Currently, Andrew is actively trading futures, equity options, currency pairs, and commodities.
Andrew has become one of the CBOE’s most recognized faces in the media, making regular appearances on Bloomberg, BNN, CNBC, and his own show on CBOETV. He is also a regular contributor for Bloomberg Radio, DailyForex.com, Minyanville.com and Jim Cramer’s TheStreet.com. Andrew received a B.S. in Finance with a concentration in Accountancy from the University of Illinois.
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Rounded Bottom In VIX (VIX, VXX, VIXN) 1.17.2013
The chart below displays the VIX. The annotations indicate that the VIX may be putting in a rounded bottom on the daily chart over the last few trading days. This comes after the whole fiscal cliff political game of chicken. After a ‘resolution’ was released, the VIX dropped and the market popped. ‘Resolution’ being code for political failure to get anything constructive done. Investors witnessed a historic drop in the VIX…this could be a basement window trade.
A basement window trade is essentially plunging into an asset with defined support below it, like jumping out of a basement window and hitting the ground…minimal damage done. There are many ways to execute such a trade, for example a call fly going out a few months with a middle strike at $17 in the VIX. The $17 level is the middle of the post fiscal cliff gap down.
Some sort of long volatility trade could be advised when one is mostly long in the market. A call butterfly is a cheap way to get long the VIX, if one is inclined to do so. Most can agree that the ETFs like the VXX are not a long-term hold. It is also interesting to note that the current implied volatility in the SPY is below its 20 year historical.
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