Unusual Options Activity In iPath S&P 500 VIX Short Term Futures ETN (VXX)
Stocks jumped today after the holiday weekend on news that the reopening of the economy is going well and continued hopes on the progress of a vaccine candidate by Novavax and Merck announcing their efforts to develop a vaccine. Transportation Security Administration (TSA) announced the number of travelers passing through checkpoints north of 250,000 for Saturday and Sunday vs more than triple the number from mid-April.
We also saw consumer confidence tick up after a two month decline. And lastly, new home sales unexpectedly rose in April. Although the recent numbers aren’t great compared to a year ago, the number are better than a month ago, which are potentially signaling a bottom and sending the S&P 500 above the 3000 level and equally important above the 200 day moving average, which has been serving as a major resistance.
JPMorgan Chase & Co. operates as a financial services company worldwide and is the biggest bank on Wallstreet. The last time we heard from JPMorgan Chase & Co. and its CEO, Jamie Dimon was one month ago, when they announced first quarter earnings and beefed up their credit reserves of $6.8B due to deterioration in the macro-economic environment as a result of the impact of COVID-19 and continued pressure on oil prices. Today, Jamie spoke and gave an updated on the economy.
P Morgan Chase (JPM) - Get Report Chief Executive Jamie Dimon said Tuesday that he believed there are “pretty good odds” of a fast rebound from the coronavirus economic shutdown, starting in the third quarter, according to news reports.
Dimon made his comments at a virtual conference hosted by Deutsche Bank.
“You could see a fairly rapid recovery,” Dimon said, according to Bloomberg. “The government has been pretty responsive, large companies have the wherewithal, hopefully we’re keeping the small ones alive.'
The VIX is quoted in percentage points and is the expected annualized change in the S&P 500 index over the following 30 days, with a 68% probability. VIX values greater than 30 represent investor fear or uncertainty, while values below 20 represent complacent in the Markets.
The iPath S&P 500 VIX Short Term Futures ETN (VXX) is the largest and most liquid in the volatility ETF/ETN universe. The ETN sees average volume of more than 15 million shares per day, typically, but spikes to more than 70 million when the S&P 500 sees a significant decline and traders pile into VXX pushing it higher.
Today, I noticed unusual options activity in VXX. The Smart Money bought over 105,000 VXX August put options with a strike price at $22.
Wharton School professor Jeremy Siegel told CNBC on today that the liquidity filling the economy by the US Feds is the main reason why the stock markets have rallied from the March lows, despite the unemployment levels and that new stock market highs this year is “a real possibility,” even if there is a second wave of COVID-19 cases. If that is the case, the VIX fallen from 33 to 22 will be a no-brainer.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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Interesting, I am considering buying LEAPS (calls) in the airline stocks, which are quite down, but with government bailouts and mean revision they could be a profitable investment. Your thoughts?
The airlines and cruise ship were up big, along with the overall market today. Both industries require consumers who have discretionary income. Who knows what's going to happen within the next 6-12 months, but from an EPS standpoint, we could see growth resume consistently in 2021 going to 2022. I think buying isn't a bad idea, you just have to give yourself plenty of time to be right, so consider an in the money or near at the money option perhaps.
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Very interesting.
I am not surprised that there are big bets on things moving in that direction. By August, it is likely the money flushed out of bonds and into equities.
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