"Chance favors the Prepared Mind." - Louis Pasteur
“Imagination decides everything.” - Blaise Pascal
“No man will ever carry out of the Presidency the reputation which carried him into it.” - Thomas Jefferson
“The only virtue of being an aging risk manager is that you have a large collection of your own mistakes that you know not to repeat.” -Donald Van Deventer
"We are pioneers and the history of pioneers is not that good." - Jeff Bezos
Here is an overview of the US market behavior last week:
Index | 21-Oct | Weekly Change | % Weekly | 2016 YTD | Volatility of Index |
Dow Jones Industrials (DJIA) | 18,145.71 | 7.33 | 0.04% | 4.14% | 13..78% (VXD) |
S&P 500 (SPX) | 2,141.16 | 8.18 | 0.38% | 4.76% | 13.34% (VIX) |
NASDAQ 100 (NDX) | 4,851.86 | 43.38 | 0.90% | 5.54% | 15.37% (VXN) |
Russell 2000 (RUT) | 1,217.51 | 4.54 | 0.37% | 7.37% | 17.93% (RVX) |
S&P 100 (OEX) | 949.66 | 2.77 | 0.29% | 4.19% | 13.57% (VXO) |
Crude Oil (CL Z6) | 51.00 | 0.68 | 1.35% | 37.58% | 32.51%(OVX) |
CBOE Volatility Index (VIX) | 13.34 | (2.78) | -17.25% | NA |
Data Source: OptionVue8
The VIX October future and options expired last week. The November contract is now the front month. The spot VIX and the front three monthly futures traded lower last week. The financial press has focused on the November (expires 11/16) VIX future vs. the November 8 presidential election. The equity markets traded higher and the VIX futures and spot traded lower. The lower VIX or “fear gauge” has been attributed to an increased showing of strength by Hillary Clinton.
CBOE VIX guru, Russell Rhoads’ “Trade of the Week” was a November 1x2 spread. There was a seller of VIX Nov 17 Calls at 1.18 who bought twice as many VIX Nov 21 Calls at 0.62 for a net cost of 0.06 per spread. At the time of the spread sale, the cash VIX at was 13.70 and the November contract at 15.80. We do not know if this is an opening or closing transaction. This trade does not meet my risk reward comfort zone for an opening trade. At November expiration, the trade is a loser between 17 and 25. Most of my VIX ratio spreads are not held to expiration. Movements in the VIX are often ephemeral. As a result, I walk away from risk and take some profits on volatility movements.
Here is an overview of last week for the VIX and related products:
Indexes | Ticker | 21-Oct | 14-Oct | Change | % Change |
CBOE Volatility Index | VIX | 13.34 | 16.12 | (2.78) | -17.25% |
VIX November Future (11/16/2016) | VXX6 | 15.575 | 17.325 | (1.75) | -10.10% |
VIX December Future (12/21/2016) | VXZ6 | 16.525 | 17.625 | (1.10) | -6.24% |
VIX January Future (1/18/2017) | VXF7 | 17.875 | 18.775 | (0.90) | -4.79% |
CBOE Short-term Volatility Index | VXST | 10.68 | 12.94 | (2.26) | -17.47% |
CBOE 3 Month Volatility Index | VXV | 16.04 | 17.42 | (1.38) | -7.92% |
CBOE Mid-term Volatility Index | VXMT | 18.24 | 19.14 | (0.90) | -4.70% |
VIX of VIX | VVIX | 87.34 | 101.01 | (13.67) | -13.53% |
CBOE SKEW Index | SKEW | 123.00 | 121.86 | 1.14 | 0.94% |
Long VIX ETP's | |||||
ProShares Ultra VIX Short Term Futures ETF | UVXY | 14.23 | 17.58 | (3.35) | -19.06% |
iPath S&P 500 VIX Short Term Futures ETN | VXX | 31.57 | 35.06 | (3.49) | -9.95% |
ProShares VIX Short Term Futures ETF | VIXY | 26.27 | 29.15 | (2.88) | -9.88% |
iPath S&P 500 VIX Mid-Tem Futures | VXZ | 36.65 | 37.88 | (1.23) | -3.25% |
Inverse VIX ETP's | |||||
ProShares Short VIX Short Term Fut | SVXY | 78.18 | 70.71 | 7.47 | 10.56% |
Daily Inverse VIX Short Term ETN | XIV | 40.08 | 36.24 | 3.84 | 10.60% |
Data Source: OptionVue8
The last week of October brings reports on new home sales, the S&P CoreLogic Case-Shiller Home Price Index, and durable goods. (I have noticed a trend towards naming rights for non-government reports. The HPI or Home Price Index has morphed something 6 words longer than when I started this weekly blog six years ago.) The big number for the week will be Friday’s announcement of the first reading of third-quarter U.S. GDP. Analysts expect the GDP to rise at a consensus of 2.5 percent.
More than 170 S&P 500 firms will report earnings this coming week. These firms will be providing fourth quarter and 2017 guidance. The most anticipated announcements are Apple on Tuesday followed by Amazon.com, Alphabet (Google,) and Twitter on Thursday. A significant portion of the energy sector will be reporting this week.
Earnings announcements and the accompanying forward guidance will be market movers this week. The week includes reports on industrial production, consumer prices, housing starts, and existing home sales. The week opens with a snapshot of the manufacturing sector. The Monday release of the Empire State Manufacturing and U.S. Industrial reports have the ability to move the market. The CPI will be released on Tuesday. The CPI is an indicator cited by the Fed when discussing inflation and interest rate targets. Economic reports for the rest of the week will focus on the housing sector.
The earnings season starts in full force this week. It is time to start preparing target equities and strategies for the next earning cycle. Confirm the date and time of a company’s earnings announcement before trading any earnings announcement strategy. The most accurate source of this information is the company’s investor relations website. I will start trading announcements this week. The earnings highlights this week for widely held and actively traded stocks are Visa, Kimberly-Clark, AT&T, Procter & Gamble, Eli Lilly, 3M, Merck, Caterpillar, General Motors, Freeport-McMoRan, Apple, DuPont, United Technologies, Express Scripts, Comcast “A”, Texas Instruments, Biogen Idec, Coca-Cola 0 Boeing, Alphabet (Google), Praxair, Ford Motor,Amazon.com, Amgen, ConocoPhillips, Dow Chemical, UPS, Colgate-Palmolive, Bristol-Myers-Squib, Master card, Chevron, and Exxon Mobil..
I have added a scan of stocks with earnings announcements to the calendar for each day in the coming week. The scan criteria are: Closing price> $20, Implied Volatility > 22, Average daily option volume > 1,000 contracts. Liquidity, as determined by width of option markets and individual option contract volume, is a crucial component in successfully trading any option strategy. One of the most frustrating experiences is an inability to adjust or exit a strategy due to lack of liquidity in the market.
Advice to stimulate your imagination:
“The fact that people are full of greed, fear, or folly is predictable. The sequence is not predictable.” - Warren Buffett
"By definition, risk-takers often fail. So do morons. In practice it's difficult to sort them out." - Scott Adams
“To achieve anything in this game, you must be prepared to dabble on the boundary of disaster.” - Stirling Moss
“Any jerk can have short-term earnings. You squeeze, squeeze, squeeze,and the company sinks five years later.” - Jack Welch
“First of all, it was October, a rare month for boys.” - Ray Bradbury
|
Economic: Chicago Fed National Activity Index – 8:30AM, PMI Manufacturing Index Flash – 9:45AM.
International Economic: Germany PMI Composite Flash – 3:30AM, Eurozone PMI Composite Flash – 4:00AM, Great Britain Industrial Trends Survey – 8:00AM.
Other: New York Federal Reserve Bank President William Dudley will give opening remarks at the second annual conference on the Evolving Structure of the U.S. Treasury Market being held at the New York Fed – 9”00AM, St. Louis Federal Reserve President James Bullard gives presentation to Association for University Business and Economic Research in Fayetteville, Ark., with Q&A – 9:05AM, Chicago Federal Reserve President Charles Evans gives speech at the Civic Affairs Society of the University Club of Chicago Luncheon, followed by audience and media Q&A, in Chicago – 1:30PM, Federal Reserve Board Governor Jerome Powell will moderate a panel discussion addressing the future of the settlement process for Treasury market transactions at the second annual conference on the Evolving Structure of the U.S. Treasury Market being held at the New York Fed – 1:45PM.
Earnings:
Symbol
|
Company Name
|
Oct 21 Close
|
IV30
|
B/A
|
AVGOPTVOL
|
TMUS | T-Mobile Us Inc | $47.05 | 29.01 | BMO | 2691 |
VFC | VF Corp | $54.30 | 29.24 | BMO | 1518 |
ZION | Zions Bancorp | $32.26 | 25.71 | AMC | 1474 |
Tuesday October 25:
Economic: Redbook – 8:55, FHFA House Price Index – 9:00, S&P Corelogic Case-Shiller HPI – 9:00, Consumer Confidence – 10:00, Richmond Fed Manufacturing Index – 10:00, State Street Investor Confidence Index – 10:00.
International Economic: France Business Climate Indicator – 2:45AM.
Other: Atlanta Federal Reserve Bank President Dennis Lockhart will give a speech to the Opportunity Finance Network in Atlanta – 1:20PM.
Earnings:
Symbol
|
Company Name
|
Oct 21 Close
|
IV30
|
B/A
|
AVGOPTVOL
|
AMTD | TD Ameritrade Holding | $36.64 | 27.14 | BMO | 1425 |
BHI | Baker Hughes Inc. | $52.25 | 32.72 | BMO | 3813 |
CAT | Caterpillar Inc. | $86.63 | 26.36 | BMO | 26337 |
CIT | CIT Group Inc. | $36.16 | 31.55 | BMO | 3446 |
DD | E I Du Pont De Nemours | $69.46 | 22.91 | BMO | 2723 |
DFS | Discover Financial | $55.56 | 24.88 | BMO | 1047 |
GLW | Corning Incorporated | $23.80 | 24.68 | BMO | 5512 |
GM | General Motors Company | $31.75 | 24.04 | BMO | 32053 |
LLY | Eli Lilly and Co | $78.74 | 22.59 | BMO | 10029 |
PII | Polaris Industries Inc. | $79.23 | 41.12 | BMO | 2206 |
UA | Under Armour Inc | $38.41 | 42.99 | BMO | 12603 |
USG | USG Corporation | $25.90 | 40.39 | BMO | 1209 |
WHR | Whirlpool Corporation | $166.07 | 30.02 | BMO | 1824 |
AEM | Agnico Eagle Mines Ltd ( | $49.17 | 43.64 | AMC | 3251 |
AKAM | Akamai Technologies | $56.73 | 47.78 | AMC | 3906 |
CHRW | C.H. Robinson Worldwide | $68.75 | 23.78 | AMC | 1215 |
CMG | Chipotle Mexican Grill | $405.10 | 39.83 | AMC | 16852 |
COF | Capital One Financial | $74.51 | 27.19 | AMC | 4736 |
ESRX | Express Scripts Holding | $71.04 | 27.31 | AMC | 7792 |
EW | Edwards Lifesciences | $117.86 | 32.16 | AMC | 1866 |
JNPR | Juniper Networks, Inc. | $22.75 | 40.22 | AMC | 3812 |
PNRA | Panera Bread Co | $195.32 | 31.26 | AMC | 1306 |
RRC | Range Resources Corp. | $38.59 | 44.97 | AMC | 4008 |
VRTX | Vertex Pharmaceuticals | $82.92 | 53.56 | AMC | 1165 |
VLO | Valero Energy | $54.77 | 29.23 | 13675 |
Wednesday October 26:
Economic: MBA Mortgage Applications – 7:00, International Trade in Goods – 8:30, PMI Services Flash – 9:45, New Home Sales – 10:00, EIA Petroleum Status Report.
International Economic: No major announcements.
Earnings:
Symbol
|
Company Name
|
Oct 21 Close
|
IV30
|
B/A
|
AVGOPTVOL
|
BA | Boeing Co | $135.84 | 23.20 | BMO | 16527 |
BIIB | Biogen Inc | $299.66 | 42.00 | BMO | 8526 |
GRMN | Garmin Ltd. | $48.59 | 37.75 | BMO | 2015 |
GSK | GlaxoSmithKline plc | $41.43 | 22.17 | BMO | 2100 |
HES | Hess Corp. | $52.65 | 39.48 | BMO | 8837 |
HLT | Hilton Worldwide Holdings | $23.00 | 27.07 | BMO | 3166 |
LUV | Southwest Airlines Co | $42.29 | 29.95 | BMO | 6512 |
MDCO | The Medicines Company | $36.51 | 128.82 | BMO | 1523 |
NEM | Newmont Mining Corp | $37.01 | 41.54 | BMO | 18461 |
SPG | Simon Property Group Inc | $197.26 | 23.15 | BMO | 1611 |
STT | State Street Corp | $71.03 | 27.68 | BMO | 1101 |
SU | Suncor Energy Inc. (USA) | $29.35 | 24.86 | BMO | 3900 |
WYN | Wyndham Worldwide | $68.65 | 32.07 | BMO | 1926 |
BSX | Boston Scientific Corp. | $23.01 | 34.06 | AMC | 3520 |
BWLD | Buffalo Wild Wings | $139.45 | 46.67 | AMC | 2074 |
EXAS | EXACT Sciences Corp. | $20.15 | 79.72 | AMC | 3276 |
GRUB | GrubHub Inc | $42.64 | 60.65 | AMC | 1636 |
MDLZ | Mondelez International Inc | $42.09 | 26.08 | AMC | 16552 |
MUR | Murphy Oil Corporation | $29.35 | 47.94 | AMC | 1793 |
NOW | ServiceNow Inc | $78.85 | 49.97 | AMC | 1709 |
NSC | Norfolk Southern Corp. | $93.13 | 25.86 | AMC | 1829 |
O | Realty Income Corp | $62.45 | 25.32 | AMC | 1094 |
TRN | Trinity Industries Inc | $23.21 | 44.49 | AMC | 1131 |
TSLA | Tesla Motors Inc | $199.10 | 43.91 | AMC | 82288 |
TXN | Texas Instruments Inc. | $69.75 | 25.80 | AMC | 8351 |
VMW | VMware, Inc. | $73.26 | 36.83 | AMC | 8673 |
WDC | Western Digital Corp | $53.86 | 44.96 | AMC | 13174 |
NXPI | NXP Semiconductors NV | $104.49 | 22.19 | 9961 |
Thursday October 27:
Economic: Durable Goods Orders – 8:30, Weekly Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, Pending Home Sales Index – 10:00, EIA Natural Gas Report – 10:30, Kansas Fed Manufacturing Index – 11:00.
International Economic: Great Britain GDP – 4:30AM, Japan CPI, Household Spending, & Unemployment Rate – 7:30PM.
Earnings:
Symbol | Company Name | Oct 21 Close | IV30 | B/A | AVGOPTVOL |
BOFI | BofI Holding, Inc. | $22.29 | 50.61 | DMT | 1955 |
HCA | HCA Holdings Inc | $82.01 | 26.83 | DMT | 4265 |
AET | Aetna Inc | $110.93 | 24.91 | BMO | 4753 |
ALXN | Alexion Pharmaceuticals, | $122.47 | 41.09 | BMO | 1379 |
BMY | Bristol-Myers Squibb Co | $50.36 | 25.95 | BMO | 50090 |
BX | Blackstone Group LP | $23.62 | 25.16 | BMO | 12906 |
CELG | Celgene Corporation | $100.02 | 32.91 | BMO | 20258 |
COP | ConocoPhillips | $41.49 | 29.76 | BMO | 19673 |
CRUS | Cirrus Logic, Inc. | $53.91 | 60.72 | BMO | 2203 |
DOW | Dow Chemical Co | $53.82 | 22.50 | BMO | 12281 |
EPD | Enterprise Products Partner | $27.07 | 23.67 | BMO | 4849 |
GT | Goodyear Tire & Rubber | $31.74 | 33.54 | BMO | 5537 |
IP | International Paper Co | $47.18 | 31.05 | BMO | 4509 |
IVZ | Invesco Ltd. | $29.82 | 28.24 | BMO | 1282 |
MJN | Mead Johnson Nutrition | $79.40 | 29.97 | BMO | 1816 |
NOV | National-Oilwell Varco | $37.19 | 37.53 | BMO | 3197 |
PRGO | Perrigo Company PLC | $88.51 | 47.24 | BMO | 2666 |
SNE | Sony Corp (ADR) | $32.72 | 32.91 | BMO | 1274 |
VA | Virgin America Inc | $54.35 | 34.49 | BMO | 1124 |
AAPL | Apple Inc. | $117.06 | 25.06 | AMC | 559250 |
AMGN | Amgen, Inc. | $161.50 | 25.43 | AMC | 12871 |
AMZN | Amazon.com, Inc. | $810.32 | 34.46 | AMC | 86382 |
BIDU | Baidu Inc (ADR) | $175.17 | 38.48 | AMC | 24108 |
BMRN | BioMarin Pharmaceutical | $84.20 | 42.88 | AMC | 2431 |
CBI | Chicago Bridge & Iron | $27.76 | 45.19 | AMC | 2394 |
CEMP | Cempra Inc | $23.48 | 139.42 | AMC | 1128 |
EMN | Eastman Chemical | $66.89 | 31.76 | AMC | 1388 |
EXPE | Expedia Inc | $124.66 | 41.38 | AMC | 8187 |
FSLR | First Solar, Inc. | $42.08 | 58.40 | AMC | 15336 |
FTNT | Fortinet Inc | $31.33 | 47.56 | AMC | 2074 |
GOOG | Google Inc. | $796.97 | 27.59 | AMC | 18654 |
GOOGL | Alphabet Inc | $821.63 | 27.36 | AMC | 28239 |
HAIN | Hain Celestial Group Inc | $36.51 | 65.57 | AMC | 7837 |
HBI | Hanesbrands Inc. | $24.76 | 38.52 | AMC | 2144 |
HIG | Hartford Financial Services | $42.89 | 25.09 | AMC | 2659 |
MCK | McKesson Corporation | $161.95 | 24.40 | AMC | 1071 |
N | NetSuite Inc | $101.63 | 51.10 | AMC | 1086 |
SRCL | Stericycle Inc | $74.68 | 45.59 | AMC | 1057 |
TCK | Teck Resources Ltd (USA) | $20.33 | 60.87 | AMC | 10749 |
TPX | Tempur Sealy International | $52.40 | 47.04 | AMC | 1996 |
VRSN | Verisign, Inc. | $76.56 | 30.27 | AMC | 1780 |
WYNN | Wynn Resorts, Limited | $96.00 | 43.19 | AMC | 32625 |
GNC | GNC Holdings Inc | $21.60 | 74.70 | 2690 | |
MPC | Marathon Petroleum Corp | $43.05 | 36.11 | 4590 | |
NTNX | Nutanix Inc | $28.50 | 94.62 | 1275 | |
TV | Grupo Televisa SAB | $26.02 | 35.72 | 1167 |
Friday October 28:
Economic: GDP – 8:30, Employment Cost Index – 8:30, Consumer Sentiment – 10:00, Baker Hughes Rig Count – 1:00.
International Economic: No major announcements.
Earnings:
Symbol |
Company Name
|
Oct 21 Close
|
IV30
|
B/A
|
AVGOPTVOL
|
ABBV | AbbVie Inc | $61.76 | 24.49 | BMO | 10418 |
COG | Cabot Oil & Gas | $22.06 | 46.76 | BMO | 3156 |
CVX | Chevron Corporation | $101.87 | 22.22 | BMO | 38793 |
PSX | Phillips 66 | $79.74 | 22.76 | BMO | 4901 |
RCL | Royal Caribbean Cruises | $70.48 | 39.18 | BMO | 4018 |
SNY | Sanofi SA (ADR) | $38.07 | 23.41 | BMO | 1547 |
WY | Weyerhaeuser Co | $31.50 | 23.66 | BMO | 1923 |
BUD | Anheuser-Busch InBev | $127.44 | 26.46 | 4664 |
Monday October 31:
Economic: Personal Income and Outlays 8:30, Chicago PMI – 9:45, Dallas Fed Manufacturing Survey – 10:30.
International Economic: Germany Retail Sales – 3:00AM, China PMI Manufacturing – 9:00PM.
Other: Bank of Japan Announcement.
Earnings:
Symbol | Company Name | Oct 21 Close | IV30 | B/A | AVGOPTVOL |
CAH | Cardinal Health Inc | $75.58 | 22.28 | BMO | 1110 |
THC | Tenet Healthcare Corp | $23.52 | 61.71 | BMO | 3414 |
WMB | Williams Companies Inc | $30.18 | 38.98 | BMO | 10664 |
APC | Anadarko Petroleum | $63.76 | 34.27 | AMC | 13364 |
EEP | Enbridge Energy Partners | $25.70 | 31.25 | AMC | 1023 |
GGP | General Growth Properties | $26.12 | 24.34 | AMC | 2900 |
IDTI | Integrated Device Technology | $20.37 | 54.97 | AMC | 1301 |
OLN | Olin Corporation | $21.90 | 40.49 | AMC | 1451 |
TSO | Tesoro Corporation | $80.85 | 35.40 | AMC | 5782 |
WPZ | Williams Partners LP | $37.49 | 36.42 | AMC | 1295 |
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