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.