Dan Deming, managing director at Stutland Equities LLC, talks about volatility in U.S. stock market and investment strategy. The benchmark index for U.S. equity options fell to the lowest since April as the Standard & Poor’s 500 Index rose for a third day and traded in a narrower-than-average range. Deming talks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." Dan at Bloomberg Studio
Dan Deming of Stutland Equities shares his insights on the important level of 1178 of S&P500. If S&P500 can't reclaim the 1200 level in the coming days, investor should be cautious about further downside risk.
Dan comments on the upward pressure on the VIX as the market moves through the third week of earnings. A full 35% of the S&P 500 components report earnings this week. The market has shown the ability to make measured strides higher over the past two months. Short term the VIX indicates that uncertainty in the market is contained, however looking at the term-structure of the VIX futures there is an indicatiion of increased volatility as we move into next year.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, recommends to sell the AAPL Nov 320 call and buy the 280 put with long stocks to protect the recent gain through earning and the election.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, recommends selling the existing GOOG stock after a huge rally and replaced by a credit put spread in Nov for his long time bullish view before earning report.
The market continues to push higher and the VIX has dropped below 20. Dan is seeing increased demand for less expensive volatility protection as the market continues to push higher. Dan expects the VIX to hold firm as we begin earnings season. INTC earnings should have an impact on market direction.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, analyzes the trading volume pattern of the past four months. He recommends to Yum Tech Option play for the coming earning season.
YUM is a little lofty, but with the depreciation of dollar and its footprint in China, Brian is still bullish and recommends a risk reversal play-buy the Nov 50 call and sell the Nov 45 put, collecting 10 cents.
Dan discusses the technical breakout to the upside in the S&P 500. After a couple of weeks of consolidation the market has now jumped to new highs from the August lows. Dan is seeing cautious optimism; he notes that there are active put buyers in the S&P 500 and call buyers in the VIX. This translates into an increased appetite for risk protection.
Benchmark borrowing costs of 10.75 percent in Brazil, 6 percent in South Africa and 6.5 percent in Indonesia" (bloomberg) are causing investors to flee the dollar in search of higher yields. Thus, the lack of PUT buying on these currencies may indicate that emerging country currencies have some room to move to the upside. With investors selling their dollars to buy other currencies, it actually may mean that investors are willing to take on risk, a positive for the stock market. Although it is counter-intuitive that money flowing out of the US is a good thing, it is beneficial to many companies with international exposure and exposure to commodities. Thus, the combination of physchological risk taking appetite and the fact that the S&P is made up of companies with such exposure mentioned may actually push the S&P 500 back to the 1200 level.
Sell UUP calls to be willing to be short the dollar at higher levels. (Feel free to revisit my buy UUP Oct 24 puts for .60. I o…
Market looks weak after a unexpected low number of consumer confidence index and then rallys to the close. Technically if S&P500 break above 1150, market will have a good chance to reach 1200. Emerging market trends higher such as EEM and EWZ. Market prices in that Republican Party will taker over and government will have further quantitative easing. Investors should be cautious that any shift in reality will trigger a sell off.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, likes Ford going forwards even after F is up more than 20% this year. However, other names in the sector are lagging which is warning sign. Brian suggests to buy the Nov 11 put for $0.25 for downside protection.
With VIX down to 20 level, Brian recommends to buy cheap put for high dividend stocks.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, analyzes the trading volume pattern of the past four months. He recommends to watch the treasury market closely. Once the interest rate rises slightly, money will flow into the stock market and volume will surge. As a results, exchange and retail brokers will benefit from the rising trading volume.
Brian suggests to buy cheap downside HPQ put as protection heading into analyst meeting which is on Sep 28th, 2010.
Dan talks about the reverse head and shoulders pattern in the S&P 500 index. On Monday, the market broke above the right shoulder which signals further upside. Recent M&A activities of IBM and other Tech names have helped this sector break to the upside as well. Dan remains cautiously optimistic. The technicals certainly look good, but Dan warns about a shift in expectations. He believes the market has priced in a Republican victory this fall. Any deviation to that could jeopardize the rally.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, is bullish on the emerging market. Specifically, he likes ishares MSCI-EMF (EEM) and recommend selling existing stocks position and buy the risk reversal (Buy Jan12 50 call at $2.7 and sell Jan12 35 put @2.85), collecting 15 cents and willing to long the stocks at 35.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, is bearish on US dollar, which is under the pressure of Japan and China strengthing their currency. Specifically, he recommends buying puts on UUP, for example buying Oct 24 put for $0.6.
The spreads between the VIX cash and back month futures has widened to extreme levels over the past week. There appears to be demand for less expensive volatility protection as the VIX moves well below the recent mean. The expectation is for the market to see increased volatility as we move into the fall.
The solid demand for the Portuguese bond offering helped propelled the US market higher on Wednesday. Dan expects short term, a sideways trending market and thin volumes for the rest of the week. The 1100 level in the S&P 500 appears to be a level of value, particularly if you look at the longer term chart pattern. For the sideways market, Dan suggests that an option overlay strategy creates opportunities to take advantage of reduced volatility. Stutland Volatility Group offers different overlay strategies depending on your risk appetite.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, is bullish on India and the emerging market. Specifically, he likes Tata Motors (TTM), an indian based auto company. Brian also thinks TLT is very volatile recently due to the sensivities of prospect of interest rate change. However, he doesn't expect a huge interest rate hike in the near term and expects to get back into the bond market if TLT falls into the 95-103 levels.
Is the third time the charm? Stock market opens September with a bang. Dan points out a combination of technical, psychological and fundamental indicators helped propel this market higher. He saw very active put buying in the VIX pit as it appeared traders were repositioning for lower volatility expectations. Short term, the market has broken the August downtrend.
Dan doesn't see real big reaction during the FOMC minutes announcement. Dan feels the Fed will hold back on any further quantitative easing unless economy starts to show negative growth. Short term he cites better than expected consumer confidence numbers, which have helped hold the market together. As for the market, however, S&P 500 tested 1040 three times in the past week and if this level is breeched, Dan expects more downside for the market and VIX could escalate back into the 30’s.
Dan discussed the disappointment in the market after the relief rally last Friday which continued into Sunday night, only to fade on Monday. The VIX firmed up as the S&P 500 approached that critical support level of 1040. He sees scaled back trading as market participants wait to see if there are any changes in the economic climate as multiple new items hit the tape this week. Dan also feels the recent M&A activity is an effort to pad the bottom line, with little top line growth prospects. However, these types of mergers do little to alleviate the current job situation in the US.
The market remains in a downtrend, but Dan doesn't want to short here from a trading stand point. He sees to much bearish sentiment in the market at this time. The market held a key technical level of 1040 in the S&P 500, so there is potential for a relief rally to work off the oversold conditions. The VIX didn’t pop like he would expect on the recent down move, which is another hint that market participants are leaning short.
Dan talks about the downtrend of market following a series of lower highs and lower lows. The S&P 500 breaks below the low of "flash crash" -- 1065 level and next support level is 1045 and 1020. Semiconductor HOLDRs (SMH) is especially bearish, even breaking the July low. However, based on the activity in the VIX, Dan feels the market's down move will be less volatile then previous tests of these levels.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, talks about his market view of sideway to slight upside in the coming month. Brian recommends to buy the Sep 100/104 call spread for $2.25. DIA Option Play
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, talks about his play on the next possible take over target: US steel. Specifically, Brian recommends to buy the Sep 45/55 call spread for $3.25.
Dan discusses the current down move in the market and where he sees the market heading from here. Dan suggests to wait and observe the market over the next couple of days while it digest the news from the Fed. coupled with economic reports from the US and asia. Based on the relationship between the VIX cash and August VIX future, Dan didn't see "unusual uncertainty" at this time.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, talks about the strong correlation between CDX (insurance premium on corporate bond) vs VIX on "Fast Money Final Call", he thinks the better borrowing and lending conditions coming forwards as implied by the correlation. CDX vs VIX
Brian also suggests a TLT collar play ahead of the Fed meeting. With TLT around 100, Brian recommends to sell the Aug 102 call for 0.30 and buy the Aug 98 put for 0.35 to protect the bond portfolio. TLT Play
As the job numbers come out today, Dan Deming talked on First Business News about what kind of affect those numbers will have on the market. Dan feels the numbers will be in line and the marekt will maintain its levels. He mentioned that we are sitting on critical trend lines and we need to see the S&P trade above 1135 to confirm up move otherwise we could fall down to 1100 or below. The short term momentum still feels high and Dan wouldn't be suprised if the job number comes out better than expected.
After a strong push with their World Cup marketing scheme and essentially doubling their growth in Africa and Asia, Coke looks poised for a nice run. The fundamentals and dividend yield are both strong and Brian has a simple trade to gain more leverage to the upside. His play is the Sept.55 call, you pay $1.80 so your break even point is $56.80, above that you start to participate as if you are long stock. Below 55 you have no more risk other than the $1.80 you paid for the trade. Brian feels Coke is at an inflection point where it may move significantly higher, possibly 10% or more in the next year.
Yesterday on the Fast Money Final Call, Brian explained the advantages of using ETF's as opposed to mutual funds. As an option trader, he loves ETF's because instead of owning mutual funds, he can trade ETF's for less fees. Also, with ETF's, he gets paired options to use against ETF's to over-write his long bias and generate income. Even though ETF's fell during the flash crash, you can still use options to mitigate your risk. Brian suggests buying a downside put for downside protection or selling an upside call to collect a little extra premium. The example Brian used was EWZ, a Brazillian ETF. He suggests selling the Dec.76 call at $3.70 and taking in some premium there. You will break even on the upside at $79.70 and you are willing to be called away above $76.00. With this trade, you add a little extra income to your portfolio and you still have the Brazillian exposure.
Corporate yields over Treasuries on corporate debt have shrunk as much as 0.38 % points on average to 2.9 percentage points from the high this year in June. Investors drove U.S. Corporate bond yields now sit on average at 4.98% last week, the lowest since March 2004, from this year’s high of 5.75% on Jan. 4, according to Bank of America Merrill Lynch index data.
Debt sales totaled $90.1 billion last month, the busiest July on record, Bloomberg data show.
The Commerce Department data also showed business investment climbed at the fastest rate since 1997 as corporate profits rose, according to Bloomberg.
Earnings will rise 35 percent this year, the most since 1988, forecasts show. Following the 2001 recession, income growth never exceeded 20 percent.
Yesterday, Cisco Systems breifly halted after triggering a circuit breaker according to the Nasdaq, causing a 10% move in 5 minutes. Brian gave his theory of what caused this issue yesterday on the Fast Money Final Call. Brian explained what dark pools do and what people don't understand about them. Basically, traders belong to a brokerage group and they send their order in, the dark pool attempts to match the order up with someone else on the opposite side at the same time and then the order is put up on the exchange. Brian explains the old style way where there was one central specialist creating liquidity on both sides but now there is dislocation because nobody knows exactly where the best bidder offer is coming from. He feels that we need to have one central location because everybody knows and understands where the order is coming in, which gives us more liquidity. Brian feels the stock market could get a nice rally if that were to happen because investors would feel more co…
Earlier this morning on Chart Talk, Dan Deming suggested the market may be looking at a death-cross where the 50 day moving averages cross below the 200 day moving averages. Often times when we see this, the market is lower 6 months after this kind of activity takes place. The S&P500, the Dow, and the Nasdaq could all be looking at a death-cross sometime in the near future.
Yesterday on Fast Money 360, Brian talked about the option side to Merck. Volatility has moved over the last 8 quarters and it is averaging a 6% move after earnings. We are seeing traders buy put protection to the downside. At this level, Brian is not a huge buyer, he wants to see a super spike in volatility in the options market before he starts to buy Merck.
Earlier today on In-the-Money, Dan Deming talked about the VIX popping up with some buyers but nothing major is happening at this point. What we are seeing is the back month futures at a very large premium. We are seeing wide spreads up to $6.00-$6.50 in the back months right now which could indicate further volatility. The market seems to be at a key inflection point and we came in to the 200 day moving average over bought. We have also seen confirmation in transports and the tech sector. The SMH is looking at possible new highs. The long-term is still a concern where we could be looking at a death cross in a lot of indexes where the 50 day average crosses below the 200 day moving averages which means we will be looking at momentum to the downside.
Why overlays – why now? 2008 market downturn exposed fundamental weaknesses
-Hedge funds did not provide a hedge.
-Fund of Funds did not provide diversification.
-Decoupling held true for only a short period.
-When global markets sank, correlation across all asset classes went to one.
-Not enough managers used dynamic hedging and volatility indices to control risk across asset classes.
-Minimal expertise and trading acumen available for using these instruments effectively
Monetizing Volatility - Management Strategies
-Volatility is typically negatively correlated with market movement and can be an important asset to manage. When done so effectively, volatility management may enhance overall portfolio returns
-Equity portfolio managers could use volatility strategies to implement long and short directional views in volatility.
-Credit managers can use volatility strategies as a diversifying hedge against broad market exposure.
-Based on these characteristics, VIX option strategies can …
This morning on CNBC, Dan talked about momentum in the market place. After breaking the 200 day moving average on the S&P 500 yesterday and confirmation from the transports and the Dow, short-term momentum seems to be high. At this point, Dan feels you can't fight the market because there are significant signs the S&P 500 index could push up to possibly 1130 or 1150. Short-term, you have to be a little bit bullish on this market place.
Yesterday on Fast Money 360, Brian talked about the options side of Boeing. He mentioned the bullish activity as 30 planes were purchased by Emirates Airlines. There have been a lot of out of the money call buyers and out of the money put sellers which is a lot of bullish activity. A few weeks ago when the stock dipped, there was not much volatility and that is bullish options flow. Brian is bullish on the stock, buy Boeing.
Yesterday on Fast Money Final Call, Brian talked about bank excess reserves being at extremely high levels. Banks are borrowing at a discount window of zero and they are continuing to build excess reserves. Brian thinks banks need to start lending again. Banks just having the reserves sitting there isn't helping the market, he feels once they start lending, the market will rally big time. If the banks continue to collect reserves and not lend them out, we could see a sideways market similar to what Japan experienced. The banks have almost a trillion dollars sitting in excess reserves, they are taking it as free money and keeping long term rates low. They must start lending again. Also, we have saw a huge move yesterday due to great earnings and a lot of company's raising there outlooks. Brian feels this is sustainable due to the large number of company's with positive earnings.
This morning on Chart Talk, Dan Deming talked about the down move we experienced yesterday as Ben Bernanke drove the market lower and really rattled the market. The S&P hit its 50 day average in the morning and the VIX bottomed out at 23.40 which is the 200 day moving average on the bottom of the VIX. Now the market is moving back to the middle of the range and Dan explains where he wants the market to stay.
Today on In the Money, Dan Deming talked about the big reversal in the VIX due to the market reversal yesterday. He also touched on the market's reaction to recent earnings reports, specifically strength in earnings reports from the banks.
Last Friday on CNBC, Brian talked about volatility numbers, mainly how they have come down since the panic numbers that we saw in May. Right now volatility is around 27 and one of the reasons for this is because the credit market has improved since May. The better the credit market, the lower volatility goes. However, in the month of July we have seen some increased volatility compared to the rest of the year and Brian thinks one of the reasons for this is banks are borrowing at the discount rate, causing volatility in the market because we aren't getting the liquidity that we normally see from banks. Brian also touched on the correlation between the VIX and the market. The VIX will spike about 4% for every 1% down move in the market. Brian's trade here takes advantage of the volatility and relative rise in option prices. Taking a look at Visa, he suggests selling the Jan. 80 call for $4.40, taking in 5% premium in stock, capping your upside and getting called away at $80. In …
Yesterday on CNBC, Brian talked about the possibility of fear creeping back in to the market. After 7 straight days of gains, the market struggled to make it in to the green. Brian feels there might be a little bit of worry because the VIX futures are trading significantly higher which leads us to believe people think volatility will rise. Although there is fear, Brian notes that much of it is to the upside right now because there has been a huge move off the bottom. He recommends taking a look at the VIX to give a gauge of where the market is going. Brian's example on how to play it is Southwest Airlines. Here he wants to define his risk and buy a slightly in-the-money call. His only risk here is at much as he paid for the call and you can still participate in the upside.
Today on Chart Talk, Dan touched on SMH and Intel. He mentions the great earnings and the positive outlook on Intel and the SMH holding up well. Dan mentioned that the SMH will not be affected so much by the numbers, although they will be good, but more on if the economy can sustain growth going in to the 3rd and 4th quarters.
Earlier today on In the Money with Angela Miles, Dan touched on the reaction of the SMH and the XLK. Dan also talks about the implied volatility of the big ETF's as well as the expectation on more earnings coming in. Check it out here...
With Bank of America's earnings due Friday, Brian talks about how to game the stock ahead of the results. He feels that financials will have a nice move off these earnings and and we'll get a nice move up. Bank of America off the last 8 quarters has moved 3% so Brian wants to go ahead and replace his stock and go out and buy a call spread of Bank of America to limit some risk. The trade is to buy a Nov. 15 call, pay $1.80 and sell a Nov. 19 call for $0.35. Here you have a net that paid $1.45 and you will start making money at $16.45. You would get called away at 19 but Brian feels in the 15 and 19 call range you will have a nice little profit.
Earnings season is upon us and Brian has a safe play to limit your risk in the Options Market. Last Friday on CNBC, Brian took a look at replacing a stock. He feels YUM! is a good play here because it has seen plus or minus 5% moves post earnings for the last 4 quarters. The play here is to sell the Aug. 38 put and with those profits buy the Aug. 42 call. Here you collect 30 cents on the trade. You will profit if YUM! gaps above $42. If YUM! is below 38 you will be put to it and have to own the stock there, but Brian feels very comfortable in doing that because he feels $38 is a good area to get in.
Live from New York this week on Fast Money, Brian explained an earnings trade in regard to Visa. The target date for this trade is July 28, Visa's earnings. Brian takes a look at selling the August 70 put at $2.10, thus collecting a 3% interest on yourself giving you a little dividend and extra interest. He also mentions that if you want to get a little risky, take a look at possibly using your put collection and buying the August 75 call to participate even more on the upside. Recently we have seen Visa bouncing off the $70 level and it seems like there is a lot of support in the stock. Overall, Brian feels this is a great trade to the upside and he thinks $70 is the range where it will have some good support.
Brian Stutland, contributor to CNBC's Fast Money on Thursdays, touches on the holiday weekend and how to respond to the VIX being at its low point on the year. Brian recommends buying protection to protect against your portfolio. Brian feels although a relief rally in the S&P is possible, it's time to play defense. He thinks it might be time to buy a Call spread on the VIX to protect your portfolio as the market may have a long way to go on the downside. In regard to the Euro rallying, Brian says he would have expected the market to rally as well, following the trend of the past few months. He thinks it might be time to search for a bottom here in the market because the classic correlation has broken between sell the euro sell the market or buy the euro buy the market.
Dan Deming explains the "fear index"-VIX in a clear and simple way at CBS2 Chicago Studio: The VIX is a forward looking indicator of expected market movement or volatility. Dan explains that there are several variables that can effect market volatility. Dan also expects the VIX index to drop to high 20s or middle 20s if the critical level 1045 of S&P500 holds.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays, recommends to take advantage of high premium of option when VIX is above 40. Specifically, he recommends selling naked puts such as July SPY 105 puts and use the proceeds to invest in treasury bond; or sold covered calls for QQQQ. VIX only go above 45 around 10 times: Russian financial crisis, Long Term Capital Management fallout, 911 world trade center attacks, worldCom bankruptcy filling, lehman brothers collapse. Only in 2008 VIX continued to go higher to 80 and it is highly unlikely to sustain the 40s level.
Dan talks about RUT and SPX formed the head and shoulder pattern which signals downside movement. Investors are anxious amid concern that Greece's debt crisis will spread through the region and rush to buy VIX upside calls. With SPX breaking down 1183 level, Dan will watch careful at 1168 level, the next supporting level. VIX reaches intraday high of 25.70 and closes at 23.84, up 18%.
Brian Stutland, contributor to CNBC's Options Action shown on Fridays at 5:30pm EST, remains bullish for the Tech Sector as seen on CNBC's Fast Money. Brain wants to protect for possible pullback but doesn't want to be out of the game. The strategy Brian recommends is buying QQQQ June 50/47 put spreads for $0.80 debit. The 1.6% of capital can protect 6% of possible loss in the coming two months while riding the bull.
Dan thinks the momentum of the market will continue higher with the strength of the broad market (RUT). The retail (XRT)and home builder (XHB) sectors look particularly strong. Dan is cautious on financials, the turmoil surrounding Goldman Sachs has slowed the momentum of this sector.
Dan Deming on CNBC opening bell outlook! With strong earning of the financial behind us, Dan Deming thinks XLF needs to challenge 17 in the next week to keep the bullish momentum going. A stall here could signal expectations were to high and a correction may be coming. Dan expects the VIX (implied volatility) to be under pressure. The gap between 30 day implied volatility and realized volatility in the SPX of ~8 is very wide and trading activity in the VIX may, June and July options suggest market players feel volatility will be contained heading into summer.
Brian Stutland is on CNBC "Options Action" to talk about his bullish view of financial based on technical breakout and fundamental improved macro economic conditions. Specifically, Brian recommends to buy the May 45/48 call spread to replace the stock to further participate the upside.
After trading below 20 for 11 days in 2010, the VIX rose significantly last week, with Jan 21st up 20% and Jan 22nd up 23%. The VIX closed the week at 27.3. The S&P 500 5d and 1m realized vol is at 22 and 15 respectively.Stutland Equities believed the VIX is overshoot and should settle down in the coming week.
On the Equities side, Stutland Equities is bullish on Goldman Sachs. However, Stutland Equities recommend to play the movement of GS as a safe play. Fast Money Halftime Report Jan25