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The IB Options and Futures Intelligence Report(Click for a Summary Explanation)
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As of: Wed, 22 Nov 2017 03:32 PM EST. Tables updated hourly. Data available real-time to IB customers in Trader Workstation

The IB Options and Futures Intelligence Report presents vital market information that is extremely useful to serious traders based on Interactive Brokers Group's experience of professionally trading the markets for nearly three decades. Option pricing data has built-in information that provides the option markets’ consensus outlook for future activity in the markets. These leading indicators can provide a guide to traders and investors before news is widely disseminated to the public at large or reflected in underlying prices.

The most important of these indicators, implied volatility, represents the markets’ view of uncertainty associated with future price movements. When the current implied volatility is compared to the prior day’s implied volatility, a large increase can foretell unexpected news developments and provide an opportunity to adjust positions accordingly. This gain indicates that option market participants anticipate greater price movement than in the past, possibly because of information that is not yet readily available. Conversely a large decrease in implied volatility indicates the expectation of subsiding price movements, possibly because all recent news has been reflected in current underlying prices. Large premium or discount of implied volatility to historical volatility over the past 30 days is frequently not justified and may represent significant trading opportunities. Other options market data presented in our report such as volumes, and call/put ratios also plays a role in understanding sentiment in the markets.

For the purpose of the tables, those symbols with less than a $5 stock price, and less than 1,000 options contracts traded, and whose company has less than $1 billion in capital are screened out to eliminate symbols whose information may be more indicative of lack of liquidity in the markets. All tables are posted every trading day on the hour from 12:00 to 16:00 ET under normal circumstances.

To view volatility and volume as well as other market summary statistics in real-time within our premier direct access trading platform, Trader Workstation, you must have an account with Interactive Brokers.

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Mouse over tabs below to view tables. Detailed explanations for each tab can be viewed in the text box below the tables.

 
Table Definition

Top Twenty 30-day (V30) Implied Volatilities

Implied volatility is the options market's prediction is the options market's prediction of how volatile a given underlying will be in the future. Implied volatility is calculated by inputting all known information into an options pricing model (i.e. option price, interest rates, dividends, strike price, and expiry date) and backing out the implied volatility.

Twenty symbols with the highest implied volatilities are ranked in descending order and displayed on an annualized basis. Implied volatility is calculated using a 100-step binary tree for American style options, and a Black-Scholes model for European style options. Interest rates are calculated using the settlement prices from the day’s Eurodollar futures contracts, and dividends are based on historical payouts.

The IB 30-day volatility (V30) is the at market volatility estimated for a maturity thirty calendar days forward of the current trading day. It is based on option prices from two consecutive expiration months. The first expiration month is that which has at least eight calendar days to run. The implied volatility is estimated for the eight options on the four closest to market strikes in each expiry. The implied volatilities are fit to a parabola as a function of the strike price for each expiry. The at-the-market implied volatility for an expiry is then taken to be the value of the fit parabola at the expected future price for the expiry. A linear interpolation (or extrapolation, as required) of the 30-day variance based on the squares of the at market volatilities is performed. V30 is then the square root of the estimated variance. If there is no first expiration month with less than sixty calendar days to run we do not calculate a V30.

Closing price, and change in price from the prior day are also displayed.

Top Twenty Volatility Gainers and Losers

The percent trading day’s 30-day Implied Volatility is divided by the prior trading day’s 30-day Implied Volatility to determine the change in volatility for the day and the top 20 gainers and losers are posted. Gainers are those symbols which the options markets believe will have the greatest up or down price movement in the future as compared to the past, and losers are those symbols which the options markets believe had a large up and down price movement and will stabilize in the future. Implied volatility, closing price, and change in price from the prior day are also displayed.

Top Twenty Options Volumes and Volumes Gainers

Options volumes for the day are displayed for the top twenty symbols with the highest volumes.

The trading day’s options volumes are divided by the previous ten trading day’s options volumes average and the top twenty gainers are posted by symbol.

Closing price, and change in price from the prior day are also displayed.

Implied vs. Historical Volatilities

The 30-day Implied Volatility is divided by the 30-day historical volatility. This ratio highlights those symbols in which the market prediction of future volatility is much different from the volatility in the market over the last 30 days. The formula for historical volatility as defined by Garman-Klass. The top twenty symbols with the highest ratios as well as the top twenty symbols with the lowest ratios are displayed.

Implied volatility, historical volatility, closing price, and change in price from the prior day are also displayed.

Top Twenty Put/Call Volume Ratios and Call/Put Volume Ratios

Put option volumes are divided by call option volumes for the trading day, and the symbols for the twenty highest ratios are displayed. For the put/call ratio, the HIGHER the value, the more negative the sentiment since it would indicate more puts traded than calls. A ratio of less than one indicates more call volume than put volume.

Call option volumes are divided by put option volumes for the trading day, and the symbols for the twenty highest ratios are displayed. For the call/put ratio, the HIGHER the value, the more positive the sentiment since it would indicate fewer puts trading than calls. A ratio of less than one indicates more put volume than call volume.

Closing price, and change in price from the prior day are also displayed.

Top Twenty Put/Call Open Interest and Call/Put Open Interest

Put option open interest is divided by call option open interest, and displayed for the top twenty symbols with the highest ratios. This ratio may indicate negative sentiment in the options market.

Call option open interest is divided by put option open interest, and are displayed for the top twenty symbols with the highest ratios. This ratio may indicate positive sentiment in the options market.

Open Interest ratios reflect a longer time period than Put/Call and Call/Put daily volume ratios and therefore tend to be less volatile.

Closing price, and change in price from the prior day are also displayed.

Synthetic EFP Rates

An Exchange for Physical (EFP) allows the swap of a long or short stock position for a Single Stock Future (SSF). SSFs have an interest rate built into their price that is determined competitively by numerous market participants. Like Repos and Reverse Repos in the debt markets, EFPs provide a cheap and efficient financing vehicle. The EFP transaction is one where you sell the stock and buy it back for future delivery by buying the SSF future, or you buy the stock and sell the SSF.

There are several reasons to use this type of transaction:

  1. If you carry a long stock position on margin, the EFP gives you the opportunity to reduce your financing cost because you will likely be able to sell the stock and buy the forward at a premium that is lower than your margin rate.
  2. If you are short the stock, you receive interest on the credit balance generated by your short sale, but this interest is less than the premium you would receive by selling the SSF and buying back the short stock.
  3. If you have excess cash in your account and would like to earn a higher return, you could buy stock and sell it forward at a premium higher than the interest your cash generates.

The tables above highlight the highest (investment opportunity) and lowest (borrowing opportunity) synthetic EFP rates available in the market. These synthetic rates are computed by taking the price differential between the SSF and the underlying stock, netting dividends, to calculate an annualized synthetic implied interest rate over the period of the SSF. All SSFs are settled through the Options Clearing Corporation, an AAA rated entity, making any interest earned through implied interest safer than with many other interest earning alternatives.

Futures Arbitrage Premium/Discount Index

The fair value of an index futures contract is computed by combining all the underlying values, adding an interest cost of carry for the duration of the futures contract, and subtracting any dividends that are paid during the duration of the futures contract. The table above compares near futures contracts with the fair value of the underlying representing a contract. When a futures price is greater than the fair value, there is a premium, indicating that the market believes there is a potential for increase in the underlying price or a decrease in the futures price. When a futures price is less than the fair value, there is a discount indicating the market believes there is a potential for a decrease in the underlying price or an increase in the futures price.

Written Commentary

As of: Wednesday August 21, 2013 at 12:30pm


Big prints in AT&T put options as shares touch lowest since January

Today’s tickers: T, HCP & DMND

T - AT&T Inc. – Heavy trading traffic in AT&T put options today indicates at least one strategist is bracing for the price of the underlying stock to potentially slump to fresh 52-week lows during the next couple of months. Shares in AT&T, down more than 13% since late April, are off 0.80% on the session at $33.61 as of 12:15 p.m. in New York trading. The wireless carrier popped up on our ‘most active by options volume’ market scanner this morning after one strategist purchased roughly 20,000 of the Oct $31 puts for a premium of $0.25 apiece. The trade may be an outright bearish bet that shares in AT&T continue to fall in the near term, or could be a hedge to protect a long position in the underlying stock. The puts make money at expiration if shares in the telecommunications company drop 8.5% from the current price of $33.61 to breach the effective breakeven point on the downside at $30.75. The stock last traded below $30.75 in April of 2012.

HCP - HCP, Inc. – Options changing hands on healthcare REIT, HCP, Inc., on Wednesday morning look for shares in the name to rally during the next couple of months. The stock, down more than 20% from an all-time high of $53.06 reached in May, trades 0.80% higher on the session at $40.30 as of 11:40 a.m. ET. Trading traffic in HCP call options indicates some traders are positioning for the price of the underlying to rebound. The most actively traded contracts by volume today are the Oct $45 strike calls, with more than 5,000 call options in play against open interest of 1,902 contracts. It looks like much of the volume was purchased for an average premium of $0.22 apiece, thus positioning buyers to profit at October expiration in the event that HCP shares rally 12% over the current price of $40.30 to exceed the average breakeven point at $45.22.

DMND - Diamond Foods, Inc. – Shares in premium snack food provider, Diamond Foods, Inc., rallied almost 20% this morning to a fresh 52-week high of $22.89 after the company issued a strong fiscal fourth-quarter outlook and said it reached a proposed agreement to settle a private securities class action pending against the company. Trading traffic in front month call options today indicates one or more traders are positioned to benefit from continued gains in the price of the underlying through September expiration. According to a press release issued by Diamond, the company plans to release fourth quarter and full year fiscal 2013 earnings in late September. The most traded contracts by volume on DMND thus far in the session are the Sep $24 strike calls, with roughly 600 contracts in play versus open interest of 352 contracts. Time and sales data suggests most of the $24 calls were purchased in the early going at an average premium of $0.63 each. The bullish stance on Diamond Foods may pay off at expiration next month should shares in the name increase 7.6% over today’s high of $22.89 to exceed the average breakeven point at $24.63. Shares in DMND last traded above $24.63 back in May of 2012.


Caitlin Duffy
Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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