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IB Traders' Insight

Global market commentary from IBG traders and market participants.

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2014-04-16 13:25:48

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor

Options

SodaStream chatter shifts volatility skew

Nothing like a rumor to shift the volatility view on a stock and that’s indeed the case following unsubstantiated reporting from Israeli financial publication, Calcalist, that domestically-owned fizzy-drinks-maker SodaStream (Ticker: SODA) was in talks with a major US company to sell some portion of itself. Shares in SodaStream have rallied by 9.1% to $41.12. Meanwhile, as overall options implied volatility dips by 4.7% to 69.72%, the shape of the curve has moved markedly as the share price pops. The website reports that the company has held early stage talks about selling a 10-16% stake in itself to a strategic buyer, while the valuation basis is said to be $52.00 per share. Calcalist reported that the talks were held with either PepsiCo (Ticker:PEP), Dr. Pepper Snapple (Ticker: DPS) or Starbucks (Ticker: SBUX). The talks include options for the buyer to receive a rising stake in SodaStream over the future, according to the story. Aside from its jumping share price, the cost of higher-strike options increased at a faster pace than the decline in lower-strike options.

For example, using options expiring April 25th, ahead of the news the implied volatility on put options 10% below the prevailing share price cost 3.2 points more than calls with a strike price 10% above. Following the move in the share price implied volatility on call options positioned 10% above now cost 6.3 points more than defensive put options. In the following plot from the IB Volatility Lab we have joined the +/-10% volatility readings from yesterday and today. You can easily see change in the constructed slope illustrating the shift in skew.     

Chart – Sodastream skew today versus yesterday

2014-04-16 12:47:51

Posted by
Caitlin Duffy
Equity Options Analyst
Contributor

Options

Short term bearish options trade on Las Vegas Sands

A roughly quarter of a million dollar play in the 17Apr’14 expiry $74 strike put options on Las Vegas Sands Corp (Ticker: LVS) caught our eye this morning, as just one full trading session remains in the life of these contracts in this holiday-shortened week. Shares in LVS are up more than 2.0% on the session at $74.90 just before 11:30 am ET and off an earlier session high of $75.44. Like many of the relative outperformers of 2014, shares in LVS have declined substantially since the beginning of March, down around 15% at its current level from a high of $88.28. Recent sessions have been volatile in this and other high-beta names, and perhaps this environment is just what the morning’s put trader is looking for ahead of expiration.

The prior two trading sessions this week saw shares in LVS trade up initially only to get slammed midday. Perhaps the aim of the very short-term trade in the $74 puts this morning was for this pattern to persist. It looks like around 4,000 of the 17Apr’14 $74 puts were purchased at an average premium of $0.62 each in the early going, versus open interest of just 264 contracts. Thus far in the session, premium on the $74 puts has eroded amid gains in the price of the underlying. But, if the shares suffer a midday slump as they have in recent sessions, premium on these contracts would move inversely. For example, on Tuesday, the stock opened at $74.73, but by 1:00 pm ET had dropped about 5.0% down to its intraday low of $71.09, ultimately ending the session down just 2.0% to close at $73.19.

2014-04-16 11:53:29

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Stocks

Waverly Advisors Midday Update

Global Equity markets and commodity movers:

Equities

S&P 500 Index (+0.6%), Spike: 0.7σ, Related tickers: SPY, ES

Japanese stocks (+2.0%), Spike: 2.0σ, Related tickers: EWJ

Indus India Index, Cash (-1.4%), Spike: -2.0σ, Related tickers: EPI, INDA

Rates and Currencies

Aust Dollar / Japanese Yen (+0.6%), Spike: 1.7σ, Related tickers: AUD, JPY, AUDJPY, FXA, FXY

British Pound / US Dollar (+0.4%), Spike: 1.5σ, Related tickers: BP, FXB

Euro / British Pound (-0.4%), Spike: -1.5σ, Related tickers: FXE, FXY

Commodities

Copper futures (+1.8%), Spike: 1.7σ, Related tickers: HG, JJC

Sugar futures (+2.9%), Spike: 1.8σ, Related tickers: SB, SGG

This list highlights large standard deviation moves using Waverly Advisors’ SigmaSpikes™ indicator—markets that are making significant moves today on a volatility-adjusted basis.

For more information about Waverly Advisors please click http://bit.ly/1mj1Toa.

2014-04-16 10:40:22

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor

Options

A setback for Twitter?

For investors hoping for signs of a spring break for the battered momentum stocks, don’t look to Twitter (Ticker: TWTR). Its wonderful rebound on Tuesday saw the stock take off from the Launchpad at $40.76 to reach $45.55 by the close. However, and in spite of a stronger midweek opening for the broad market with some decent economic data to boot, shares in Twitter are bleeding once again Wednesday and have pulled back to $43.50 within the first hour of trading. Options traders pounced on its weakness by snapping up cheap two-day put options, which would reward investors if Tuesday’s good fortune was reversed. Some 2,800 put options with a strike price of 41.0 have traded at around 10-cents so far Wednesday while only 5,500 positions at the strike were open as of Tuesday’s close. Twitter shares are currently down by 3.21% at $44.08. Implied volatility on the name remains higher at 123%.

Chart – Puts active on Twitter at Friday’s $41.00 strike

2014-04-16 10:11:19

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor

Macro

Industrial Production

It turns out that February was the really strong month for manufacturing after the Fed revised higher the pace of advancing output. March too was strong, but in that month some sectors came off the boil. Auto and parts production, for example, slipped by 0.8% in March but after a whopping 6.9% February increase. The annualized pace of auto output thereby eased to 11.27mm units from a pace of 11.5m. However, the omens look good for a broad-based rebound given the earlier consumer spending report, and as the level of capacity utilization across all industries rose to 79.2 to reach its highest since June 2008. Business equipment rose by 0.5% following a 2.0% February gain. Within that advance, construction materials rose by 0.2% having jumped by 1.05 in the prior month. Output of computers and electronic equipment also gained. Consumer goods production also advanced at a slacker pace. Appliances, furniture and carpeting all advanced but the overall pace of 0.7% for the group compares to a 1.4% gain in February. Adding to the strength among manufacturers, output across energy industries bounded in March with utilities expanding output by 1.0% as natural gas output recovered, while mining output advanced by 1.5%. Overall, a sturdy report consistent with the theory that the economy is rebounding from a harsh winter. 

Chart – Capacity utilization at six-year high even as auto production takes a breather

 

2014-04-16 09:18:00

Posted by
Jamie Lissette
Trading Analyst
Hammerstone Group
Contributor

Stocks

Hammerstone recap

An afternoon rally in stocks helped drive the S&P 500 higher by 70 bps to close the day on Tuesday.

The Macro

On the macro side, we first had the inflation data. The CPI came in at 1.5% YoY vs. 1.4% expected. The Core CPI came in at 1.7% YoY, slightly higher than 1.6% expected. Although the CPI is not the Fed’s preferred measure for monitoring inflation, a higher than expected CPI would calm some fears that the US could be headed for deflation.

The Empire State manufacturing index was a big miss; the index fell to 1.29 in April from 5.61 in March. Analysts were expecting the number to rise to 8.0. We saw another miss in the NAHB Housing Market index which came in at 47 vs 50 expected. The previous month’s number was also revised down to 46 from 47. This was the third straight month that the index remained below 50, which is not a good sign for the home builders.

We also had Fed chair Janet Yellen speak but she didn’t say much in the way of monetary policy. Yellen said that there was still room for tighter capital standards and regulations for large banks.

On The Forum

Much like the rest of the market, many participants on the Hammerstone Forum do not have a strong conviction on the direction of the market on either side. One of the participants suggested earlier in the day that the SPUs have been making higher highs and higher lows, which is generally seen as a bullish sign, but many others were hesitant to take a bullish view.

Participants on the forum exchanged ideas on some bargain stocks after the recent meltdown in the momentum complex. However, many participants appear to be hesitant to take sizable positions in high-beta names, fearing that the recent rout might not be over yet.

Looking Forward

Fed Chair Janet Yellen speaks again today, and unlike yesterday, today we might get some comments on monetary policy as well. She will be speaking at 12:25PM at the Economic Club of New York. We also hear from Lockhart (8AM), Stein (8:30AM), Lockhart again (12PM), and Fisher (1:25PM) today.

In terms of Macro Data, we have Housing Starts/Building Permits (8:30AM), and Industrial Production/Capacity Utilization (9:15AM.)  Initial Jobless Claims and Philly Fed are on tap for tomorrow.

Although Yellen’s comments could be important, we believe that the earnings would remain in focus and drive the market forward in the near future. Still to come in earnings this week:  AXP, COF, GOOG, IBM, SNDK (tonight); and BHI, BLK, DD, GE, GS, HON, MS, PEP, SLB, UNH, UNP (tomorrow.)

 

The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com.

2014-04-16 06:44:33

Posted by
Stephen Alley
IB Asia Trade Desk
Contributor

Stocks

Softbank leads the Nikkei to a 3% rally

Today tbe Nikkei closed 421 points higher at 14,418 (+3.0%). USD.JPY began the day unchanged at 101.9, but had weakened by 0.3% at the close, with USD.JPY trading at 102.2. The Nikkei was led higher by Softbank (9984) which opened +6% and later closed +8.5%. Softbank contributed 70 points to today's Nikkei rally. Softbank was buoyed by the strong Alibaba earnings (Softbank owns a 37% stake in Alibaba) outlined in Yahoo's first quarter earnings released after the US market close overnight.

The Nikkei also received a boost overnight from a report that the Japanese Cabinet Office planned to cut their economic forecast in ther Monthly Economic Report due tomorrow, increasing expectations for further stimulus.

2014-04-16 04:20:32

Posted by
IB European Trade Desk
Contributor

Stocks

Market update: Netherlands/Belgium

  • ASML may report EU230m 1Q net, according to avg est. of 21 analysts surveyed by Bloomberg. ASML is scheduled to report at 7am CET.
  • Ziggo (ZIGGO NA) 7:30am, 1Q sales EU399m (4 est.)
2014-04-16 04:19:43

Posted by
IB European Trade Desk
Contributor

Stocks

Market update: United Kingdom

  • Channel 5 Owner Desmond Mulls Multiple Bids for U.K. Broadcaster
  • Ex-ICAP Brokers Conspired With Hayes to Rig Yen Libor, SFO Says
  • BHP Billiton: Operational review, raises annual iron ore estimate after quarterly gain
  • Reckitt Benckiser Says Spinoff for Pharma Unit IPO is possible
  • Tesco FY trading profit GBP3.32b, est. GBP3.23b (avg. of 13). FY sales ex-VAT GBP63.6b, est. GBP63.9b. Final div. unchanged at 10.13p, BDVD forecast 10.13p. FY U.K. trading margin 5.03%, est. 5.1%. 4Q U.K. LFL sales ex-fuel, ex-VAT down 3%, est. down 2.5%
  • Burberry Group (BRBY LN) says second-half sales rise 13% on online growth
  • Hargreaves Lansdown (HL/ LN) Quarterly Inflows Hit Record $3.86 Billion
2014-04-16 04:19:36

Posted by
IB European Trade Desk
Contributor

Stocks

Market update: France

  • Danone 1Q total LFL sales up 2.2%, est. up 2.2% (median of 14). 1Q total sales EU5.06b, est. EU5.15b (median of 13). Total sales impacted -8.9% by adverse FX. 1Q vol. down 1.9%, est. down 0.1% (median of 12). Confirms 2014 forecast: LFL sales growth 4.5%-5.5%, trading oper. margin down 20bps to up 20bps, FCF ~EU1.5b ex-items. Sees consumer demand similar to 2013, with sluggish trends in Europe, significant carry-over of milk price inflation, persistently high FX volatility in emerging markets. 1Q LFL sales by unit (all median of 14): Fresh Dairy up 3.9%, est. up 4.5%, Waters up 8.9%, est. up 8.5%, Early Life Nutrition down 7.7%, est. down 9%, Medical Nutrition up 5.2%, est. up 5.5%, Europe ex-CIS LFL sales up 0.5%, CIS & North America LFL sales up 7.8%, Asia-Pacific / Latin America / Middle East / Africa LFL sales up 0.5%.
  • Eurosic (ERSC FP), 5:30pm, 1Q rev., no est.
  • Aeroports de Paris (ADP FP): co. says March passenger traffic rises 0.9% to 7.3m
  • Edenred (EDEN FP): co. says 1Q revenue falls 4.6% to EU238m; confirms medium-term growth target for issue volume
  • HF Company (FP): co. says 1Q sales down 5.4% to EU20.9m
  • Mercialys (FP): co. says 1Q rental revenue down
  • Orchestra Premanan (FP): co. says Dec.-Feb. sales rise 13% to EU106.4m
  • Theolia (TEO FP): co. signs financing of 21-megawatt wind farm in France
  • Vetoquinol (VETO FP); Co. says 1Q sales drop 3% to EU73.2m
  • Virbac (FP): co says 1Q sales fall 1.2% to EU180.5m
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