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.
The CBOE S&P 500 Volatility Index (VIX) closed at 20.69 today, up another 10.7%. That took the “fear index” above the 200-day moving average at 19.98. The VIX had previously moved above the 50-day moving average at 17.86. I’d be surprised if we don’t see more market nerves driving more buying of S&P hedges to send the VIX higher next week.
Time–and more–to admit that this insurance policy I took out on March 24 against a big drop in stock prices isn’t going to pay off. I paid my premium and other than peace of mind–maybe–I got nothing in return.
The Apple September 17 Call Options with a strike of $150 in my Volatility Portfolio climbed another 23.3% today. The options looks to be moving up as traders position themselves for a bump in Apple after the company’s next new product day–speculation has the date for the announcement of a nee iPhone as September 14 with pre-orders to start on September 17. The announcement is likely to be big news and will probably drive the stock higher. For the September 17 Call Options, however, the date is something of a double-edged sword since a September 14 announcement–a big positive–runs right into the time decay of the options since them expire on September 17.
A day after shares of Microsoft (MSFT) hit another all time high (see my post from yesterday August 19 on why) the shares have tacked on another 2.63% (as of 3:10 p.m. New York time) today to trade at $304.58. That has pushed the price of the September 17 Call Options with a strike price of $285 in my Volatility Portfolio up another 42.04%.
Today the CBOE S&P 500 Volatility Index (VIX) dropped another 2.24% to 15.70. That puts the “fear index” back in the “complacency zone” where I’ve been looking to buy Call Options on the VIX in anticipation of a bounce back to the top of the current zone at 20 on the next “bad news” day. (Whatever the bad news might be.)
I got another 50% pop (aso f 3:30 p.m. New York time) today in the price of the Advanced Micro Devices (AMD) September 17, 2021 Call Options with a strike price of $92.50 (AMD210917C0009250). I’m going to take my profits here. With the end of earnings season in the next two weeks, I think the risk/reward ratio for holding stocks is shifting toward risk. And I’d rather be more in cash rather than less as we head into what I see as a volatile fall.
I expected the jump in the Advanced Micro Devices (AMD) Call Options (expiration of September 17 and strike at $90) before yesterday’s earnings report. Didn’t get it. Then. But today this option is up 72.17% to $9.90 on a 7.36% gain in the price of the shares to $97.74 (as of 2:20 p.m. New York time.) So I’m selling.
An odd market before big tech earnings #1–I’m holding onto my AMD and APPL options until after earnings
As of 12:15 p.m. the Standard & Poor’s 500 was down .01% and the Dow Jones Industrial Average was lower by 0.75%. Tech stocks were down much more with the NASDAQ Composite off 1.85% and the NASDAQ 100 lower by 1.82%. The tech companies due to report earnings today after the close were all down. Apple (AAPL) was lower by 1.68%. Advanced Micro Devices (AMD) had dropped 2.01%. And Microsoft (MSFT() was off 1.66%.
Intel’s disappointing guidance sets up good earnings report for AMD on Tuesday–here’s how I’d time selling my AMD Call Options
The September 17 Call Options on Advanced Micro Devices with a strike price of $90 gained another 9.09% today. The company reports earnings after hours on Tuesday July 27. I’d certainly be thinking about selling and taking my profits on these options before the actual earnings announcement.