I’m adding Puts on Apple (AAPL) and Alphabet (GOOG) to my Volatility Portfolio today as insurance against a big market dip on a bad (as in high) Consume Price Index inflation number tomorrow, October 13, and against selling in the shares of these two stocks on their earnings reports on October 27 and October 25, respectively.
We’ve had a great one-week rally/bounce/whatever in chip stocks. Nvidia, for example, was up 17.42% for the week that ended on Thursday, July 21. Advanced Micro Devices (AMD) was up 8.71% in that same period. But I think there are good reasons for thinking that this move was just a very short-term gain in a long-term Bear Market that remains in place. So today, I’m taking some chip money off the table.
Today, July 12, shares of American Airlines (AAL) closed up 9.98%. The company announced that it expects to post a pretax profit of $585 million in the second quarter as vacationers pack planes during the summer peak season. The company expects revenue to be about 12% higher than in the same quarter in the pre-Pandemic year of 2019.
I’m not putting on any leverage bets on market direction at the moment. The trend is just too “trundles.”
This week’s Trend of the Week asks Why, despite all the turmoil in the markets, has the CBOE Volatility Index–also known as the VIX, or the “Fear Index,” remained so low? I think this should signal to us that the market has not currently worried in the near term about long-term problems it knows are coming down the road, like rate hikes and a recession at the end of 2022 or in 2023.. In the VIX’s short-term view, there’s no need to worry. Time to put a call on the VIX?
Friday, March 18, is a triple-witching day in the options market where roughly $3.5 trillion of single-stock and index-level options are set to expire, according to Goldman Sachs. At the same time the market wills the rebalancing of benchmark indexes, including the Standard & Poor’s 500.
Putting on those emerging market hedges ahead of schedule–today, right now–buying EWZ and EWW Put Options
When I posted over the weekend that coming increase in interest rates from the Federal Reserve and the possibility of soaring energy prices from a Russia/Ukraine conflict and the ensuring sanctions by Western allies against Russia constituted a double whammy on emerging market assets and developing economies. A strong dollar and higher U.S. interest rates would exacerbate a looming debt crisis (yes, yet again) in the developing world, and higher oil and natural gas prices (and tighter supplies) would hit developing economies really really hard. I said then that I’d be looking for hedges to insure against and profit from the downside risk in emerging market assets. Well, things have moved faster than I expected
As of 11:15 a.m., the market is tumbling and the VIX “Fear Index” is up 15.79% to 22.22. My January 26 VIX Call Options with a strike at 20 (VIXW220126C00020000) have soared 61.11% to sell at $290 a contract. With the expiration date of January 26 approaching I’m selling this position today.
The CBOE S&P 500 Volatility Index (VIX) hasn’t moved much so far in today’s session. The so-called “fear index” is down just 0.23% to 17.26 as of 3:20 p.m. New York time. But there’s been strong action in the options market with risk hedges for the end of January and the middle of February showing losses. I’m going to use today’s selling to buy two VIX Call positions in the Volatility Portfolio.
On the theory that after Friday’s panic, we will get at least a modest recovery on Monday, I’m selling the three VIX Options in my Volatility Portfolio as soon as the market opens on Monday. The CBEO S&P 500 Volatility Index (VIX) jumped 54% on Friday to close to 28.62. My opinion is that we’ll see the “fear index” give back some of that jump on Monday if the market stabilizes. (If you think the market will plunge further, you should, obviously, hold onto your VIX Call options.
Our regular (or occasional or perhaps occasionally regular) Friday series (actually running on Saturday this week) Trick or Trend looks at what might (or might not) be emerging investible trends. Exclusively on JAM. This post won’t run anywhere else. Ever. There might be a trend here but with the recent performance of the CBOE S&P 500 Volatility Index (VIX) it’s really hard to tell.
Huge surge in volatility this morning. It’s as if everybody woke up and said, “Hey, you know there are risky trends in the world.” As of 12:30 p.m. New York time today, Monday, September 20, the CBOE S&P 500 Volatility Index is up 29.51% to $26.08. I think there’s more volatility ahead so today I’m going to sell the VIX November 17 Call Options with a strike price of 18 in my Volatility Portfolio and buy some more time with a purchase of the VIX December 22 Call Options with a strike price of 19.