Gamma is Cheap(er)

With the market making new yearly hi's (SPY chart below), the price of front month options in the SPY is priced considerably lower than its back month comrades. As depicted in the skew charts below, 2011 illustrated a common skew that we often see - front month options being most expensive based Implied Volatility, or IV, relative to the other series. As you can see in the final skew chart, front month options are pricing in very little movement for the coming weeks. This is not really surprising given the general outlook on the VIX and the market action seen earlier this week in the VIX options, where vol reeled some 6 pts lower in a single day. With the vol of the vol so to speak seemingly headed lower, gamma is currently cheap and maybe will be cheaper still. Nevertheless, it provides some intriguing possibilities and opportunities, not the least of which is a reversion to the mean trades (read short calendars - warning:could take a while) or outright long gamma positions to speculate or hedge against near term portfolio events. Happy trading.

http://seaofopportunity.blogspot.com/ 

VIX Vega beat down

Important to ask yourself why they are doing this?

http://seaofopportunity.blogspot.com/ *Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow! No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Big March Roll on VIX

Pro Trade in the VIX: 32ish

Sonar Report: Lower but Stable

good overview of the VIX trading... 

Sub 24 on Volatility Sonar Report

Could VIX move 5-10 in next few weeks?

Option Flow Recap March 4

Macro / Thematic 

Technology SPDR XLK - An investor Bought 40,000 June 23 / 26 put spreads for $0.73, sold 110,000 March 20 / 23 put spreads at $0.02

VIX - April 22/32/35 call tree traded for .95 20k times and 22/27/30 call tree trades were also active

　 

Consumer

CL Colgate-Palmolive Company - An investor sold 13,000 May 70 Puts at $0.71 and bought 13,000 May 85 Calls for $0.46 

TGT  Target Corporation - An investor bought 6250 October 50 Calls for $5.05, bought 6250 October 52.50 Calls for $3.65;  sold 18,750 October 57.50 Calls at $1.65 and sold 18,750 October 48 Puts at $2.42

Energy

HK Petrohawk Energy Corporation- 10,000 January'12 25 / 35 call spreads were bought

KWK Quicksilver Resources Inc - 5,000 April 14.0 Calls were sold at $0.80

　 

PBR Petroleo Brasileiro SA - July 43/50 call verticals trade 12,500 times at $1.65

Industrials / Materials

ADS Alliance Data Systems Corporation - 11,000 January'12 55 puts were sold at $1.55 

YRCW YRC Worldwide Inc. - 14,000 April 5 and 14,000 June 2.5 puts both appeared sold at $2.79 and $1.07 respectively.  

UNP Union Pacific Corporation - 1800 January'12 95 calls were bought for $9.20

　 

Tech

HPQ Hewlett-Packard Company - Right on the close an investor sold 9,000 August 37 Puts, bought 6,000 August 42 Calls and sold 9,000 August 47.50 Calls 

QCOM QUALCOMM, Inc. - 10,000 March 60.0 Calls were bought for $0.31

　 

Financials 

C Citigroup Inc. - An investor sold 10,000 Jan 12 5/5.5 call verticals for $0.14 - could be closing after BAC downgraded C today

JPM JPMorgan Chase & Co. - An investor sold 31,000 March 47.50 Calls at $0.23 and bought 7,000 April 47 Calls for $1.01.  

BAC Bank of America Corporation - An investor bought 20,000 January'13 12.50 Calls.  Possibly unrelated someone sold 20,000 March 15's at $0.08

PNC PNC Financial Services - Sold 4,500 May 55 puts and buys 4,500 May 62.5/67.5 call spreads for a net $0.08 debit 

　 

Healthcare 

HGSI Human Genome Sciences - 1000 April 27 puts were sold at $3.05 

LIFE Life Technologies Corp. - 5000 April 55 / 50 bullish risk reversals traded for $0.40 to open.  

GENZ Genzyme Corporation - 5000 July 75 calls were sold at $1.47

*Special thanks to Flotilla Partners, Option Radar, BMO Capital, MEB Options, LiveVolPro, CBOE, Option Monster, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.