Unclench Opportunity Cornucopia
IV slammed at the highs with shorts covered
Well, here we are, and to think last weekend I lamented the 5600 put calendars were too high, well for shame. I must have forgotten what happened last month and the power of the quarterly opex tractor beam.
Yet, this means setting the rifle sight on the back half of September an easy target, with implied vol being trashed….wait, have you read the following phrase here in the past….before the event???
Oh yes, as usual, vixpiration looms and event vol is being crushed again:
If you recall, I often mention that the most beaten up stuff tends to rise into expirations, after which they are unclenched by the expiring options. So the point is now to look to the watershed of post vixpiration/quarterly opex for cheap vol opportunities.
I mean, does this chart from my September 4th post look more realistic now? Certainly, this month was more volatile (and shouldn’t make bulls feel sanguine about things frankly), but back to nearly the highs akin to last year:
So, I ran a simple screen of largest 5-day bounces with market caps over 50B, and this is what it spit out:
The market police lineup has hauled in the usual suspects, as you can see, a lot of semis, which certainly saw semi short tourists forced to cover as the open interest gamma dictated. It was a nice idea though, wasn’t it, the noble premise of extreme valuation and poor ROI, how old timey. The markets don’t work like that anymore, this is not Buffett and half smoked cigs in 1973. We reside in the perma bubble era, currently under the auspices of Jay QE. Ask Einhorn, he’ll filibuster you on the topic….
Anyway, humorous editorializing aside, let’s just dive in and look at post Fed/vixpiration/quarterly opex/worst week of the year trade ideas.
How about this, another chart that demonstrates the return to the prior opex price theme:
Speaking of retail, did you notice this week XRT implied how suddenly healthy the consumer got overnight? Credit card balance spikes and ALLY charge-off warnings be damned, more fincom:
Jokes aside, back to AMZN, a put diagonal for a small debit seems appropriate.
AMZN Sep 20th/27th $180/177.5 put diagonal spread, net debit approx: .25:
This is exactly the time period when AMZN in past years has weakened:
If you think AMZN is loyal to past prices around expirations, take a gander at AVGO: