Sea of Red

Aqumin had a successful launch of our AV Professional Beta last Thursday and I want to thank all of our Beta Testers. Here is a simple way to use AlphaVision Pro to look at the holiday action (or lack of it) using the Option Landscape for the SPY.

For traders new to options the Christmas holidays mark a generally illiquid time as the market takes a week or so off. I use the Option Landscape to take a look at the S&P 500 ETF (SPY). Note below you see mostly red buildings (each building height is the current implied volatility) which signals drops in implied volatility for most call options in the SPY around the 125 handle. I show the Mid Vol point of the SPY around 11.54% for the Dec Quarterlies. That seems cheap until you look at the 14 Day Historical (Realized) of the SPY itself. That number is a single digit.

(If you would like to be a beta tester go to www.aqumin.com/thestreet)

The underlying market will need to pick up to the end of the year to support even these lower Implied Volatility levels.

Snapshot taken at Dec 22nd at 10am ET.

Merry Xmas!

Andrew Giovinazzi

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A WEEKLY look at the SLV

One thing Aqumin’s AlphaVision landscape does very well is show broad market relative comparisons of pricing information. I have been keeping an eye on the CBOE’s new Weekly products for a while trying to get a sense of how they trade. And, duh, it is just expiration every week.

Using the Aqumin Option Landscape (patent pending) to see current Mid Volatility between the bid/ask and 2 week Historical Volatility a nice little pattern emerges. Greener series have MidVol higher than the current 2 week historical (that is mostly in the junk calls). Red series means the MidVol is trading below the 2 Week HV. If you look at the Option Landscape for the iShares Silver Trust ETF (SLV) below you see a lot of red centered around the at the money options, especially in the Weeklies.

This means the current Weekly pricing does not expect the SLV to be as volatile next week as it has been over the previous two. The Christmas effect is damping down those silver bells.

(If you want to learn more about 3D visualization of financial data visit www.aqumin.com)

Andrew Giovinazzi

If you want to use this Option Landscape in AV Professional click the 14 Day MidVol Outlook View in the Option View Library.

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Visualize Your Sales Force with AlphaVision and GoodData

Aqumin is a Financial Market Visualization company. Our AlphaVision software provides a 3D market view that helps financial professionals get an edge. In developing our Enterprise Intelligence server we often run across technologies and opportunities outside of finance that are worth looking into. We recently discovered GoodData(http://www.gooddata.com).

GoodData is a cloud based application that provides a new way of interacting with business data. They host a number of APIs that allow you to upload data to their servers. Once the data is there they provide a number robust solution for analyzing and presenting the data through a web interface. They have a number of modules that make it very easy to export data from other data services like SalesForce.com and ZenDesk.com.

We thought it might be interesting to see if we couldpush this data in to AlphaVision to create a top level ‘god’s eye view’ of the data to complement GoodData’s fantastic data summary tools. We used GoodData’s sample Sales project and here are some of the images we were able to produce(click on the image to see the full sized image):

Closed Sales Timeline:

(Click to enlarge)

In this landscape we display all of the closed sales that have closed in the system. The height and color of each tower is the Expected Revenue of the sale. Tall green towers are bigger deals than short red towers. We then plot the sales with the x-axis being age of the deal in the system and expected revenue on the y-axis. We can quickly see that this particular sales force has been very successful. The number of sales increase as age decreases.

Open Leads Timeline:

(Click to enlarge)

In this landscape we are looking at the open leads. The height is still the Expected Revenue but we’ve changed the color to the probability that the deal will close. Fortunately for this organization it looks like the more valuable sales are also the most likely to close. There may be a story here. Is this just wishful thinking or are these deals actually closing at the estimated probabilities? Another interesting artifact in this sales lead landscape is the strong bands that occur at particular times (ie the strong band of red around 94 days). What is causing this? Did the Sales VP send out a memo to update the system. Was this a clerk entering contacts from a trade show?

Stage Time Line:

(Click to enlarge)

In this landscape we change the y-axis to the currently classified ‘stage’ of the sales lead. This shows a ‘stale’ categorization. There seems to be a number of very old open items in each category. This may make sense for a prospect, but what about negotiation? At some point you may need to be honest with yourself that your negotiations have broken down and it is time to re-categorize the lead. If you were to tie this landscape to a web asset using the sales lead id you could quickly identify the sales leads that need to be updated and take care of the task in AlphaVision.

After completing this experiment we feel like there are some very interesting applications to be discovered in the sales area. If you are an existing GoodData customer we’d love to talk with you about how AlphaVison can help you get additional value out of your GoodData investment. If you are having trouble getting your hands around your sales force you may want to consider taking a look at GoodData’s offerings and how it can be enhanced using AlphaVision.

Technical Details: These landscapes were created using Aqumin’s AlphaVision running on an average laptop with a mid grade graphics GPU. Data was pulled from GoodData using a GoodData connector in Aqumin’s Enterprise Intelligence Server.

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Airport Trade….

The Airport Trade was famous in the 90’s when a floor member, I think it was the CBOT, put on a huge position and left for Brazil. If it worked out, he came back and if it did not he became a new Rio resident. Never came back.

Dashing off on a trip now (no crazy open positions) and I am reviewing the post I did for TheStreet.com today and I noticed a pretty solid undercurrent in Historical Volatility in Aqumin’s AlphaVision Landscape (www.aqumin.com). In general I use the landscape to look for a trading opportunity in real time. Given all the market activity, what looks interesting? Sometimes a longer term trend might appear that is just a consequence of how the data ended up being arranged in a particular view.

Looking at a standard list of two week historical volatilities might not look too exciting. But in AlphaVision™, with the added dimension of relative movement something shows up. The red/white buildings are all names in the top 500 Market Cap stocks and ETF’s trading near or below 37 volatility on a 2 week basis. The 37 volatility number is not that significant, but since I have been watching that is now a good chunk of the market trading down there and corresponds to the lower VIX numbers. Notice most of the tall buildings are red. The building height is the absolute value of an underlying move as a percentage of 1 Standard Deviation. All this means is that tall buildings are moving more than their volatilities imply. Notice how most of that action is bunched in the lower volatility names. The name I selected, Tata Motors, stands out as a volatile name not moving as a point of reference.

Andrew Giovinazzi

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We've got your Sales Growth right here...

One of the recurring stories of these past two earnings seasons was the lack of sales growth.  Or maybe it was just the lack of guidance.  Either way those reasons were enough to send more than a few stocks down the market garbage chute in the short term.  Now I want to take a look at the last 6 months and see if there are any bargains out there with real, growing sales.

First I use the Aqumin (www.aqumin.com)AlphaVision Landscape to indentify relative 6 month Total Returns.  The bigger the spike the bigger the 6 month total return, and there are plenty of tall spikes out there the last 6 months.  Also, I used the soft sorting of the AlphaVision ColorBar to highlight 5 year Geometric Sales Growth of 15 Percent or more (in Dark Green).  The sales shrinkers are in red. (Even most of those are up the last 6 months)

My simple little sort left me with Southwestern Energy Co. (SWN).  SWN leads the Energy sector in Sales Growth (5 year compounded Sales Growth) and what I thought was interesting is that the sales numbers are back up to the 2008 highs.  The stock is not.  In a day of massive rallying, using AlphaVision, it is not too hard to find a name that is not yet ahead of itself.

Andrew Giovinazzi

For AV for Bloomberg users, just click in the View Library to interact with this view live (Geometric Growth Sales per Diluted Share). If you are not an AlphaVision for Bloomberg Subscriber please follow the download link here:  Download AV for Bloomberg

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Replay Today's Market Activity in the S&P 500

Price Pct. Moves For The S&P 500 On Nov 30, 2010


Click the link below to follow todays market activity. The whole day is compressed into 58 seconds.




Aqumin's AlphaVision Landscape is arranged in the Aqumin Market Replay as follows:


Height: Price Pct Change in Real Time (On top of the horizon is up, On bottom is down)
Color: Price Pct Change in Real Time (Green up, Red down)
Order: Market Cap (bigger market caps are in the lower left corners)


Notice Info Tech never recovered today from a very ugly opening.


For more information on 3D visualization of financial data go to www.aqumin.com or email me at:
andrew.giovinazzi@aqumin.com




Andrew Giovinazzi
EVP Business Development, AQUMIN LLC

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RF Implied Volatility coming in

Take a look at the January options in RF, large volume and Implied Volatility down -1.1v.

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This Cloud Stock is Smoking...

A weekly analysis of what is going on in the S&P 500 seems like a good idea for the Aqumin blog.  Everyone follows the VIX (CBOE S&P 500 Volatility Index) but some of the underlying forces that make up the names in the S&P 500 are also worth noting.  My AlphaVision landscape helps break the underlying volatility action into digestible chunks.

Three things I like to look at are: where the stock has been (1 Week Total Return), how the stock has moved (HV60) and where the market thinks the volatility is going (IV30).  This is one combination of data I use to find opportunities when I write columns for the TheStreet.com's OptionsProfits and it is something AlphaVision does uniquely well.  Take a look at the IV30 less HV60 landscape above.

Tall and Green means the stocks are up for the week and the IV30 is trading at a premium to the HV60.  In many cases, there is a lot of green because of the smoother nature of HV60 and is a big reason behind why fund managers write calls successfully.  What I look for is degree.  How much "really green" and in what sectors?  This gives me an idea of what paper's expectations are for the sectors and whether I recommend calls to write.

The big red spike can't help but get your attention. That is Salesforce.com (CRM).  The giant move on earnings and the subsequent violent up moves has pushed the IV30 below the HV60 and in general is against trend for the S&P 500.  This at least looks like a warning not to sell options in CRM.  This cloud stock is smoking, and I will heed the warning.

For more information on AlphaVision visit us at www.aqumin.com.

Enjoy the Holiday!

Andrew Giovinazzi

For AV for Bloomberg users, just click in the View Library to interact with this view live (IV30 outpacing HV60 with 1 Week Total Return). If you are not an AlphaVision for Bloomberg Subscriber please follow the download link here:  Download AV for Bloomberg

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The Dead Cat Bounce

Now the EU is going to see what is under the lid of the Irish Banks. I hope they find more than a couple of cases of Guinness (although with all the bad debt that might be a plus). While that might have been part of the reason for the selloff yesterday the market was pretty even in selling everything except a couple of retail stocks. More than a couple of times I have used selloffs as buying opportunities but this time I want to use it to find a value somewhere else.

I am going to take a widely used volatility metric, the difference of IV30 (30 Day Implied) to HV60 (60 Day Moving Average of the underlying) and map it across Aqumin's (www.aqumin.com) AlphaVision Landscape.

Everything where IV30 is a premium to HV60 is in green (with dark green being over a 10pt difference for reference) with both metrics close to even in white and IV30 at a discount to HV60 in red.  The height of each building is 1 Week Total Return (inverse scale) to catch yesterday's smack.  Notice how the vast majority of the landscape is green with only a few red buildings.  This is because the HV60 will produce, in general, a less "bumpy" volatility number because of the greater sample size.  You should expect that in normal conditions.  Both Cisco (CSCO) and Aegean Marine Petroleum Network (ANW) stand out as having the HV60 far exceeding the IV30 which is an indicator of a market shock (the "tallness" being a severe down move).  You can contrast that to Puda Coal (PUDA) which also had a significant down move but the market is not pricing the IV30 at such a discount (the skinny white building in the back corner of the sector).

For CSCO and ANW, the forward looking volatility number IV30 appears to be discounting any future move as big as what has happened (relatively cheap IV30 versus the move) but for PUDA, IV30 is keeping pace with HV60, expecting more of the same underlying movement as came before.  This PUDA cat has plenty of bounce left in it.

Andrew Giovinazzi

For AV for Bloomberg users, just click in the View Library to interact with this view live (IV30 outpacing HV60 with 1 Week Total Return). If you are not an AlphaVision for Bloomberg Subscriber please follow the download link here:  Download AV for Bloomberg

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Moving Trains and Falling Knives...

Anyone who has traded or invested knows that you don't want to get in the way of a moving train.  Ride the train, yes, but stay out of the way on the other side.  I just got off of my own ride for my posts on the TheStreet.com's Options Profits, winning 19 of 20 in retail option picks.  It was bound to end but that does not mean I like it.

Fortunately, I have Aqumin's AlphaVision Landscape to find new opportunities to take a closer look at.  It is like an alert system you never have to reset to see market currents.  Just click a View and see what is happening in that space in time across the names you are interested in.  AlphaVision effortlessly creates visual alerts in the nooks and crannies of the equity markets.

Take a look above at the S&P 500 yesterday at EOD.  My eyes were immediately drawn to the giant spike in the back of the landscape.  The tall red spike means Dean Foods (DF) got smoked on the day and the dark red color means that the name is lagging behind the entire S&P 500 for the month.  A falling knife if there ever was one.  Most likely that would come up on a typical alert, if you could set for both.  But what you also see is 1 month total return and 1 day total return at once, for 500 names instantly per Industry Sub Group (Bloomberg).  This is like looking at 500 rows and two columns on a spreadsheet already divided up by Sub Group in one shot.  On a down/strange day it is easy to see what has been on a tear.  The move in context generates a new idea.  One last thing to note is the run up in implied volatility prior to earnings in the old school chart on the lower right, pretty lucky bet there.

Back to DF now... It is not a name I will jump out and recommend but put into an AV watch list for future reference.  As I flip through my View Library looking for more anomalies, DF will pop in context with all the other names I follow.  Maybe the Falling Knife will regain the earnings power (milk is a commodity after all, aren't those going up?) it enjoyed in 2007 (it was a $40 stock then) but I will keep watching until my landscapes tell me to look harder.

Andrew Giovinazzi

For AV for Bloomberg users, just click 1 Day vs 1 Month Total Return in the View Library to interact with this view live. If you are not an AlphaVision for Bloomberg Subscriber please follow the download link here:  Download AV for Bloomberg

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Unloved Technology 3x

Each week I write Option picks for TheStreet.com Options Profits.  Follow the link below to see my post and learn more about the landscape shown below.

Unloved Technology 3X

Andrew Giovinazzi

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EPS Surprise – This Stock is a Steel

Each week I write Option picks for TheStreet.com Options Profits.  Follow the link below to see my post and learn more about the landscape shown above.

ArcelorMittal (MT) EPS Surprise

Andrew Giovinazzi

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Foreclosure Crisis – Impact for Financials???

What does the Foreclosure Crisis mean for the Financials?

What now, the Paper Pusher crisis?  We had Financial Meltdown in '08, Greek Meltdown this Summer, Irish Meltdown last month and now the US Equity market is to be consumed by mortgage foreclosure paper pushers.... Ouch!  Have the markets found the ultimate foil in the US legal system and all the processors who inhabit it?  Nasty thought.  Let's see how this has played out in the Financials of late.

What I have done, as usual, is created a 3D visual Landscape in AlphaVision to tell the story about what is going in the Financials.  For simplicity, I used the S&P 500 divided up by GICS Sector Names.  I sorted by rows to make what is going on more evident.  Also, for this Landscape, I used just one market indicator, One Week Total Return.

In the snapshot above, the rows of Increasing 1 Week Total Return are sorted from right to left, bottom to top.  The lowest Total Return for each Sector is the last Red Block on the bottom right and the highest total return is the green block in the upper left hand corner.  Red is down for the week and green is up with white being flat (or close to it). The height of each building is the absolute value (degree) of the move. As you can see Bank of America (BAC), which really has taken most of the bad press on the paper pusher crisis, is not even down the most for the week.  The Financials as a group are not the worst performer of the week.  The Utilities as a group have done worse.  While the press talks up the foreclosure issue, it seems to have passed the Equity Markets thus far.  The Financials even had some names moving up.  Maybe BAC is a buy....

Consumer Discretionary (upper left hand corner), on the other hand, looks a bit overbought (lots of green).  Let's see what happens.

Andrew Giovinazzi

For AV for Bloomberg users, just click 1 Week Total Return in the View Library to interact with this view live. If you are not an AlphaVision for Bloomberg Subscriber please follow the download link here:  Download AV for Bloomberg

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EPS Surprise – Do Earnings Matter Anymore?

Reading the news first thing in the morning these days disturbs my coffee.  When I read things like, "The New York Fed joins a group of investors demanding Bank of America buy back mortgage securities...."  What?  That is not what I call a stabilizing force in the fragile Banking Industry right now (Financial Sector is the 2^nd row, right side).  What happened to due diligence and back channel sorting out of issues to solve problems?   Unfortunately this is one of many problems that are clouding what I call the "Confidence Factor."  Anyone running a business (and I include our sparky little company, Aqumin LLC) needs to plan and they need confidence to plan.  I'm not here to argue the politics, but the market is showing us that confidence in planning is very low, probably near or below 2002 levels.  I created a simple AlphaVision Landscape to show this.

First I created a landscape with the S&P 1500 Universe that have reported earnings this cycle (just set to Latest Announcement Date in the Landscape Filter Bar and pick your dates)   All the dark green buildings are stocks that have surprised on the upside for EPS by at least 25% in the October earnings cycle (the last two weeks).  White and light green buildings are from 0 to 25% surprise on the upside.  I have Apollo (APOL) highlighted for a reference point.  Even a passing glance says companies are reporting well above earnings estimates in this cycle.  But here is the kicker: building height measures total return for the last week and I flipped this landscape over. All the names you are looking at are actually down for the last week.  I figured with the sell off yesterday these names would be back to even at worst - but not so.  At the least, the market is still selling companies that miss earnings.  Something is dependable (red spikes).  Companies are having a hard time with "guidance".  They are making money but, "don't ask for more information because we don't have it."  This landscape rounds out my low "Confidence Factor" thesis.  The unintended trading result from this landscape is that, for this cycle at least, if you want to unload a name do it the day before earnings are announced.  You will look right most of the time.  It is what a company is not saying that the market is listening to.

Andrew Giovinazzi

For AV for Bloomberg users, just click EPS Surprise with 1 Week Total Return in the View Library to interact with this view live. If you are not an AlphaVision for Bloomberg Subscriber please follow the download link here:  Download AV for Bloomberg

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Ferdinand or Raging Bull??

Those of you that have been reading my posts for the Aqumin blog I thank you for your patience as I have been contributing to the TheStreet.com's Option Profits lately.  Those posts are mostly option oriented picks for TheStreets' subscribers (but do show up in Yahoo Finance now and again on Wednesday's after the close).  For my posts at Aqumin I am going to stick to the broad volatility trends I watch daily using AlphaVision for Bloomberg.  I'll be sharing my observations with you weekly.

There has been so much takeover action (is Bain Capital really buying Gymboree?) that I thought a broad gauge of volatility in the S&P 500 was a good idea.  I am not talking about the VIX, but the short term underlying (HV10) volatility of the stocks themselves.  In the AlphaVision Landscape below the big green spikes on top of the landscape are stocks up the most for the last week with the greatest change in HV10.  You can think of these stocks as rallying with gusto (more Robert DeNiro in Raging Bull) and the red stocks show declining HV10 (more like Ferdinand in your kid's books).

I highlighted both King Pharmaceuticals Inc (KG) and Adobe Systems (ADBE) for context in the green spikes.  The simple take away here is that HV10 is trending down for most of the S&P500 (but stocks have been mostly up) which in general is a better time to write calls against existing stock positions (the red ones).

If you are looking for up and out short term, write the green spikes (too late for KG though, Pfizer beat you to it).  Of note to me as well is the general lackluster performance of the GICS Financials in the back left corners.  Not one big green spike.  Just how long will they remain the Ferdinand's of the equity market?  Tune in next week....

Andrew Giovinazzi

For AlphaVision for Bloomberg subscribers please click the 1 Week Momentum BLP view to see this in Real Time (chose the S&P 500 Universe) and navigate to the names in your portfolio.  If you are not an AlphaVision for Bloomberg Subscriber please follow the download link here:  Download AV for Bloomberg

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Processing a Volatility Play on LPS

My latest Option pick for TheStreet.com.  Follow the link below to see my post and learn more about the landscape shown here.

Volatility Play

Andrew Giovinazzi

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Totally Rad

Here is this week’s Option pick that I wrote for TheStreet.com.  Follow the link below to see the article and learn more about the landscape shown above.

Totally Rad

Andrew Giovinazzi

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Every Ship at the Bottom of the Ocean had a Chartroom

 

Each week I write Option picks for TheStreet.com.  Follow the link below to see a sample post and learn more about the landscape shown above.

http://www.thestreet.com/story/10864624/1/every-ship-at-the-bottom-of-the-ocean-had-a-chartroom.html?cm_ven=GOOGLEN

Andrew Giovinazzi

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Will HP's Bid for 3PAR Push Up News Sentiment?

The 24 hour news cycle creates a difficult climate for companies that suffer from bad headlines. Companies face a slide in news perception that never seems to go away. Bad news turns to very bad news because it lingers and gets rehashed for days on end. Let's examine the case of Hewlett Packard (HPQ) in Aqumin's AlphaVision Landscape.

Below left, I have a News Sentiment Landscape showing the Short Term News Score of each scoring news story (the Short Term News Score is derived from RavenPack News Analytics and reads -50 as lowest scores and 50 as the highest score). Each Building in the landscape represents that Story Score and those News Stories are grouped by the News Category, such as Stock Loss, Fraud, Dividend Announcement, etc. Tall green buildings have very positive News Scores and tall red buildings have very negative News Scores. Also note, each category is ordered on the landscape by the average score of each group. The very worst average News Sentiment Scores are in the back right and the very best average News Sentiment Scores are in the front left corner.

What does this mean for HPQ? Well, HPQ had the lowest average scoring stories of any major equity between August 5^th and August 20^th. Actually, most of the tall red buildings in the back corner are HPQ stories, the worst being under the "Corruption" category. There were only a couple of positive scoring stories centered around the earnings announcements.

Above right, is a detail of the story landscape that shows the effects of the CEO departure. Story categories like Stock Loss, Executive Scandal, Stock Loss and Executive Resignation all damaged the company and HPQ's stock price (to year lows). These News Categories have nothing to do with the economic performance of HPQ, but a lot to do with the perception about corporate governance. The HPQ Board of Directors acted quickly but tone of the sentiment remained very negative. In this case, the quick action was not well received by the market.

This makes me wonder about HPQ's announcement this morning to launch a hostile bid for 3PAR. No doubt HPQ is in a clash with Dell (DELL) for market share, growth and PC domination. This bid could be business as usual in a tough space. But a little part of me thinks this bid is to stem the tide of Negative Sentiment gushing from the open wounds of the Hurd departure. It is tough not to think that when looking at the blood red color of sentiment for HPQ lately on my News Sentiment Landscape.

To see how the 3PAR bid scores on the News Sentiment Landscape, download AV Pro and click the 12 Hour News Score in the AlphaVision View Library. If the sentiment is strong enough, look for HPQ to start to recover in the weeks ahead.

Andrew Giovinazzi

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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What did this Earnings Season mean in the Banks?

For the most part, the major indexes climbed a wall of positive earnings reports until last week. Lately, it does not take much to make things turn south and push everyone to the exits. With the VIX in the mid-20's this is understandable but I would like to see additional reasons.

In Aqumin's AlphaVision Landscape I created a MultiView of two different sets of data on the same underliers, namely the Banks in the S&P 500 that have reported since July 1^st. The view on the left has Net Income Surprise as Height and Color. I have Regions Financial (RF) selected because it had the best performance of the Banks over the last month (those are the names in the lower left hand corner). The big green buildings are showing Net Income at least 10% above analyst expectations.

On the right side, you are looking at Sales Surprises with big green buildings 10% above analysts' expectations as well. While there are some positive results there is a lot more red in the landscape and not near the upside. Simply put, the Sales Surprises were not as good as the Net Income Surprises. The top line in the Banks was not giving everyone the happy feelings they were looking for. Right now the market is looking for "fantastic" to help counteract the multitude of new worries that seem to perk up every week. Slow Sales growth for Banks means they are not really lending. No bulls like that. On to next earnings season.

Andrew Giovinazzi

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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Monitoring VWAP for Opportunities

By the time the market opens in the morning, I have a short list of securities I want to watch closely. I watch for opportune times to enter or exit positions on my list. One thing I monitor closely is where stocks are trading relative to Volume-Weighted Average Price (VWAP). A lot of large players like pension funds and mutual funds have rules about where they trade relative to VWAP, but I'm not concerned about my activity influencing the market, so I'm using VWAP as a way to alert me quickly to interesting activity.

I created this landscape in Aqumin's AlphaVision™ software. The buildings represent the stocks that I'm watching today. They are organized by sector, and sorted by market cap, so the big companies show up in the bottom left of each sector. Color tells me how each stock is trading: green means it's trading up, red means it's trading down. The height of each building tells me, in real-time, how each stock is trading relative to its VWAP. Stocks above the landscape are trading at a premium to VWAP.

I'm interested in the outliers. Bank of America (BAC) and General Electric (GE) immediately stand out to me. They are trading above their VWAP, but are red so I know they are down on the day. If I were monitoring this data in a spreadsheet, I would not have this level context. With the AlphaVision™ visual landscape, I noticed immediately two major stocks that were bucking the general market trend. Watching this play in real time, I noticed a nice opportunity to get into these positions right as they started a solid recovery off their lows.

If you have a Bloomberg terminal and would like to watch this view update in real-time, visit the Aqumin webpage to download a 30-day trial of AlphaVision™ for Bloomberg 2.5. After you install the software, search for VWAP Deviation in the View library on the right panel.

Jason Javarone

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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What is the CDS Market telling us?

For a while the major Oil Companies and Drillers were drifting out of the news. The nasty leak from the BP well was not getting constant attention any more as a mostly successful cap was put in place. Four of the largest Oil Companies are beginning a program for rapid response to a spill, all of which is very good. The problem is part of the market is not buying this, yet.  You can measure this by examining the Credit Default Swaps (CDS) 5 Year Par Spreads. The CDS spread is an indication of how much it costs to insure a fixed amount of a company's debt from default. Higher spreads mean that the market is pricing a greater chance of default, thus more implied risk.

Using Aqumin's AlphaVision Landscape, the risk premiums for the Gulf Disaster related companies using 5 year CDS Par Spreads have shown pretty hefty growth over the last 3 months. This is what you would expect from the uncertainty that had grown over the spill situation. BP, APC and RIG have dominated the headlines and their increasing 5 year CDS par spreads show it. Look at the Tall, Red buildings in the landscape on the left. The other names that pop up are DO and NE and would bear further research to see if there is an opportunity there.

Using a feature in AlphaVision, you can see the same landscape footprint of GICS Sectors by 3 Day Change in 5 Year CDS Par Spreads side-by-side with the 3 month change. RIG is the only name of the 5 previously mentioned that has not responded well to BP's successful cap. In fact, RIG's CDS premiums are still going up. Note the landscape on the right in the MultiView, where RIG was pretty much alone with expanding 5 Year CDS Par Spreads over the last 3 Days while BP, APC, DO and NE had declining spreads over the same time (those are the Tall Green buildings under the landscape on the right). Recent news about a disconnected fire alarm and the attendant liability for RIG is making itself more apparent in the CDS market. This RIG is too hot to handle. Maybe it is time to start examining the other names on the list as the CDS spreads cool for them.

Andrew Giovinazzi

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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The Pipelines are Pumping...

I won't even try to predict the price of Oil or other Carbon Products. What I would rather do is follow the gobs of money that know better. The Equity Market has been taking its daily drubbing and I wanted to see what was running counter to the market trend.

I watch the top 3000 stocks with listed options in the Bloomberg Terminal. I am using a View from the Aqumin View Library called "5 Day Daily Value vs 3 Month Daily Value." You simply click the button and this View appears for your selected universe of stocks while it gets the appropriate data from your Bloomberg Terminal. Very Easy. Look for tall green buildings which signify Consecutive Days Up, and the 5 Day Average Daily Value of the name traded are greater than the 3 Month Average Daily Value. Two Industry Groups stood out on the Landscape, indicating lots of positive action over the last few days, Pipelines and Debt Funds. I chose Pipelines because Magellan Midstream Partners LP (MMP) stood out the most overall (tall, deep green color), and was trading 3.5x its 3 Month Average Value over the last 5 days. The tall red ones are up on very light volume (below 3 month average actually). From experience I discount those because not a lot is trading and they move in a whisp.

In general over the last month MMP has shrugged off the market's malaise. Someone thinks they know where MMP is going in the months ahead.

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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What a Wells Letter Looks Like

Some companies have the unfortunate problem of getting a Wells Letter from the SEC. Plaintiff lawyers circle and sue the company on behalf of shareholders. A Wells Letter is kind of like the SEC getting in your kitchen and turning over all the pots and pans.  This is nasty business for the publicly traded company. Using AlphaVision™ for Bloomberg the Wells Letter impact looks like this.

The stock flagged in the View above, Amedisys Corp, (AMED) received a Wells Letter a couple of weeks ago. In this landscape, taller buildings are down the most consecutive days in a row. AMED stands out among the top 3000 or so names I follow in AlphaVision™, being down the most over 8 consecutive days. The green color indicates higher 5 day average of daily value traded (1.29x the 3 month average). Money is leaving AMED in buckets in a market with relatively light volume. Something to think about before you do some Bottom Fishing.

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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Is there really a Silver Lining?

There is so much talk about inflation and printing money that it seems a foregone conclusion. Gold is near its all time highs. The conventional wisdom on this is pretty set in stone. Commodity prices will skyrocket again with inflation, yet US Treasury securities keep moving up. Eventually the Treasury Securities or Gold will reign supreme (kind of like on the Iron Chef). Once in awhile there is a contrarian bet on this that stands out. Take a look at the ZSL on this AlphaVision ETF Landscape. The ZSL (Proshares Ultrashort Silver) is an ETF that looks to mimic a negative 200% bet on the price of silver. Silver goes up, and the ZSL goes down twice as fast on a given day. Silver goes down, and the ZSL goes up twice as fast on a given day. The returns on the ZSL have been pretty bad over the last year, down some 60% as the precious metals have popped.

The ZSL stood out because there were not very many stocks (or ETF's) that were up at all over the last two days (the exceptions being all of the Long Treasury ETF's in the foreground) with larger 5 Day Average Value traded versus the 3 month moving average.

What the picture above shows was that the 5 Day Average of Value Traded was 1.5 times greater than the 3 Month Average. Money was moving into the ZSL yesterday and over the last two days in much bigger size than normal. Someone here looks to be making an unconventional bet on metals prices that works more with the continued rise in Treasuries. Food for thought....

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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Aqumin Announces New Version of AlphaVision™

June 22, 2010 - New York, NY

Aqumin LLC today announced the unveiling of AlphaVision™ 2.5 at the SIFMA Financial Services Technology Expo in New York. AlphaVision™ 2.5 provides the first ever Options Landscape. Traders can instantly compare multiple option classes for hundreds of underliers on one screen in real time.

“Instead of screening for just the top option movers, the AlphaVision™ Option Landscape can show multiple option movers and their subtle changes in Option Classes that would normally slip by screening tools. Instead of just having a few Equity names on a watch list, our users can follow 1000’s of individual strikes and multiple classes at once and easily see changes in implied volatility instantly.” said Andrew Giovinazzi, EVP for Business Development at Aqumin (former 15 year member at the PCX and CBOE).

Implied volatility skew for Apple and Google, showing real time data on each individual option. Height shows Real-Time Implied Volatility, with tall building representing higher values. Color indicates Open Interest, with green indicating higher values and red indicating lower values. Each row has calls on the left and puts on the right. Rows are ordered by term, with individual options ordered by strike.

Also announced today, Aqumin has added a new “View” Library which brings market professionals closer to the views they want to see with a single mouse “click”. Pre-configured market views allow users to see and interact with stock, option, ETF, bond and Index data in a 3D Market Landscape in real time – on one screen for interactive analysis.

Aqumin’s rapid innovation cycle, also includes the simultaneous release of their Enterprise Intelligence Server to complement AlphaVision™ 2.5. Aqumin’s Enterprise Intelligence Server provides the same 3D interactive landscapes for Business Intelligence, Surveillance, Regulatory, and Risk-management professionals. AlphaVision™ EI Server seamlessly integrates with Oracle, MS SQL Server, MS Analysis Server and OData.

“AlphaVision™ 2.5 is a tremendous advance to increase data transparency in today’s dynamic volatile market environment. Too often data important to decision making is hidden from view buried in our databases. AlphaVision™ 2.5 takes full advantage of current 3D hardware so you can see what you need to see quickly for timely research, and trading decisions. With our new Options Landscape – derivatives are now more transparent than ever. AlphaVision™ is an innovation whose time has come." said Michael Zeitlin, CEO, Aqumin

Aqumin specializes in the integration of large scale complex financial and other data into a single easy to interpret visual environment for financial professionals. AlphaVision™ integrates with data from Bloomberg, Hanweck, Activ Financial, LiveVol, RavenPack and other premier data providers.

To experience AlphaVision™ 2.5 e-mail Aqumin or visit Aqumin’s website to participate in early beta access. Aqumin anticipates AlphaVision™ 2.5 release in early summer 2010.

Aqumin LLC is a new financial services company specializing in the integration of large and diverse data sets into a seamless interpretive environment for individuals, professionals and enterprise organizations. With Aqumin technology, clients can See Everything and Miss Nothing ™. Aqumin is headquartered in Houston, Texas. For more information, go to www.aqumin.com.

Media Contact:
RoseAnn Byers
SVP / Director of Operations
Aqumin LLC
Tel: 713-781-2121
Email: roseann.byers@aqumin.com

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ONE COSTLY MESS- News Sentiment and Option Volatility

This oil spill is like a vortex. Ruins everything it touches. Coastline, jobs and companies, you name it. Like the spill itself, it casts a dark shadow over the market. What the spill is doing is affecting market sentiment and not in a good way. We can now actually measure market sentiment (I use News Analytics from RavenPack) and create a number from it and combine that number with other market data.

News Sentiment Scores are measurable and so are changes in Implied Volatility. The landscape above sets up that scenario.

What I am looking at is a pyramid of News Sentiment in an AlphaVision™ Landscape. The skinny tall red buildings are scoring news stories with the lowest News Sentiment Scores for each group. I have defined each group as the change in volatility over the last 3 days of the 2^nd (July) expiration month for the At the Money options. The group on the lower left is the decile that had the biggest up move in Implied Volatility over the last 3 days (from yesterday's close). For bad news and volatile market action Anadarko Petroleum (APC) stands out.

This activity has pushed up implied volatility across the board in APC. The ATM July volatility exploded from the mid 70's to the 90's. This movement has pushed the volatility up in the Jan 2011 leaps well to mid 60's. The news that APC owns (but did not drill) 25% of the leaking well made this happen. Bad news can drive and sustain very high Implied Volatilities.

I can't help but think there is an opportunity in this mess but it will take a while for APC's liability exposure to sort itself out. The higher Implied Volatility levels on the Jan 2011 leaps interest me most for a longer term buy write with the expectation that APC's role in this problem diminishes (APC did not drill the well but owns 25% of it). The outer month Implied Volatility should come down to lower levels (the farther terms' volatilities are already starting to slide down as of today). There is still significant risk (and reward) here, but this could be an opportunity.

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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BACK TO THE FUTURE- A Look at Relative P/E and Return on Equity

The market hates uncertainty.  I used to teach new traders pricing options to make people pay for their uncertainty.  When the markets swoon, traders are making people pay (volatility premiums go up as they should in these conditions) and buyers are hitting the exits.  We have seen this in droves the last couple of weeks.  Most of the news surrounding the markets has had little to do with what companies are doing and the money they are making.  The markets need more decisive action by the Euro governments and seem to be getting it as of this morning.  So there is a bit less uncertainty.  The best way to make some money from all this noise is to add a little more here.  It might be unpalatable but the pricing is much better because so much worry is already priced in.

As I write this post of Friday the 21^st, the SPX is up a bit, 3pts and the VIX is down a bit, 3 pts.  The market is about where it was after the panicky sell off on Thursday.  With this correction being compared to 2008 (Will it happen again?), I thought it would be instructive to include the 2008 Meltdown in a comparison of the Price Earnings Ratios of today with the absolute low of P/E’s over the last 3 years.  Adding 5 year Return on Equity as a barometer of performance over a difficult period should help too.  Since the market is smacking everything maybe something shakes out.  This should be a chance to pick up cheap earnings multiples and I want to find the best ones. I look for the tall red building in the lower left hand corner of each sector.  That would mean high Average Return on Equity over the last 5 years and a low P/E for today and relative to the last 3 years. For this market period, I am going to stick with the larger names for a buy write candidate.   You should look at each sector independently but what stood out the most were just the two names in Energy, Diamond Offshore (DO) and Consul Energy (CNX). Both have relatively high 5 year returns on equity but the market is marking down their earnings the most.  As of this writing CNX Jun 39 calls for 1.05 with CNX no higher than 35.60 looks interesting for a buy write opportunity. 

Notice a lot of red in Health Care.  No real surprise given health care reform but both Abbott Labs (ABT) and Gilead Sciences (GILD) made new P/E 3 year dead lows as of this writing.  Both are in the upper middle of 5 Year Average Return on Equity for Health Care in the S&P 1500.

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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What does the Market Volatility Landscape look like?

The Euro shivers still resonate.  No doubt.  Usually for a day or two lately but they are very real and drive our equity and volatility markets to hair raising swings.   The stock market does not seem to care about fundamentals or earnings anymore.  Does any of the recent volatility moves make anything standout as a possible opportunity?

I created a Volatility Landscape of 3 key components of activity on Friday the 14^th- Daily Price Moves, Option Volume and Implied Volatility.  For Implied Volatility I am choosing the 90 Day ATM (at the money) Implied Volatility (IV90) to see if there has been long term assumption changes given the very violent short term movements. If the action in the Euro Zone looks like it is cooling down this week, I will be looking to take advantage of some of the volatility that ratcheted up from last week. More volatility means more premium!

4:50 ET Friday, 5/14/2010 

First I look for the winners on Friday the 14^th.  The entire landscape above shows stocks and ETF’S up on the day.  The big sector in the lower left is Industrial Materials- the Gold Stocks.  The short flat buildings in the upper right corners of each sector had no Call Option Volume on the day so I discount the names when I am surveying the Volatility Landscape.  For volatility movements to be interesting on a big day like Friday there should be option volume in the name.  The Tall, skinny buildings had a sharp change in 90 Day ATM Implied Volatility but no volume (just a wide market in an illiquid name) so out it goes.  Issues that were up on the day with increases in 90 Day ATM IV on decent volume get my attention.  I have the ETF’S highlighted because there is more activity there that is dispersed around the group. One ETF, in particular, stands out on volatility movement and option volume, the TLT (iShares Barclays 20+ Year Treasury Bond Fund).  The other names in the ETF group were mostly contra and short funds and some of the Gold ETF’s.  The TLT’s showed the greatest positive change in 90 Day ATM IV on names that were up with solid option volume on Friday. 

By limiting names to only those issues that perform positively on the daily gyrations of the Euro/Greece problems, I am selectively looking for securities I think will decline the sharpest as the Euro events subside. The long term US Treasury is performing as the flight to quality instrument and the longer term volatility in the TLT rose sharply because of it.  The out of the money call spreads in the TLT are starting to look interesting at these levels. Maybe there is a trade to be had here for someone?

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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Market Gyrations create opportunities as Options Premiums expand

The insane market gyrations over the last week have had one positive note for investors.  Option Premiums have increased because the market volatility has gone up (VIX is over 30 as of the close).  Volatility is a key component of option prices and has a direct effect on the premiums of calls and puts.  The market is presenting a good entry point today for investors looking for more yield by selling options against equity positions (buy write).  Let’s focus on the At the Money (ATM) options that will yield at least 6% until June expiration (June 18^th, 2010).  Also, I want to take earnings out of play by only looking at companies that have already released .  The stocks have to be down only 5% or so over last 30 days to avoid “problem” names, so I filtered for that.  The strategy here is to collect the yield from the option premium and offer some downside protection (at least 6%) while things are still choppy.

I have ordered the landscape so that stocks with the most expensive ATM Implied Volatility in June relative to the 30 Day Historical Volatility of the underlying stocks are in the lower left hand corner.   Pay attention to the green issues in the lower left corners of each sector as they fit my Buy Write Filter to a higher degree.   With stocks falling and volatility moving up sharply, there is much more (green) to chose from.  The PDE At the Money buy write yields +6% on the options alone until June Expiration.

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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The Earnings Picture

Yes…and it really is a picture.  With all the ink spilled on the bad news headlines over the past four weeks, I thought it would be a good time to see just how good the earnings looked directly, and to compare them side by side with everyone reporting.  Organizing the Earnings Season in one place seemed to be the most reasonable way to find companies that are moving out of synch with their peers.  Because I concentrate on stocks that trade listed options, about 1,000 of the stocks in the universe I follow have reported.  The first landscape shows all stocks that beat estimates in green.  Stocks that beat estimates by 25% or more are darkest green.  The Earnings Landscape is the color of money as it turns out.  There is a lot of green out there.  Issues in white are even with earnings expectations and red issues are below expectations. The height of each building is total 1 month returns (buildings above the horizon are positive shown in first figure).    Negative returns are below the horizon and shown in the next figure.  You can see that most of the stocks that beat estimates by 25% or more are up for the last month.  I highlighted SUN in the Energy GICS Sector that had beaten estimates by the greatest percentage and is also in positive territory for the last 30 days.  All issues that had the highest return AND were up the most in the last 30 days are sorted from lower left to upper right within each GICS sector.

Now - lets flip the landscape over (Below -building height is now negative returns) so we can see who had positive earnings relative to estimates AND had negative returns for the last month.  I picked the Energy Group  because I noticed a company that beat estimates by a solid amount (+60%) but was down the most for that group.  The building stood out across the entire landscape.   After I zoomed in I discovered it was Massey Energy (MEE) and the stock is suffering from the mining tragedy.  As I clicked through, I noted British Petroleum (BP) swooning on the oil spill, and Diamond Offshore (DO) had beaten estimates - but were the worst performers in the Energy Group that posted positive earnings surprises besides MEE.  This only took a couple of seconds to spot using my software, AlphaVision from Aqumin.  All these names have been in the news lately for various reasons, none of them good (except earnings news).  DO (at 8.5 PE ratio) catches my interest because it beat estimates but lagged peers in performance over the last 30 days.  Off to check the options…

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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Greece is the Word……

That catchy line from the movie seems to describe the change in action on Tuesday.  I have been writing over the last month about risk in general (VIX and CDS spreads) and there was an undercurrent of pricing that seemed to foreshadow movement when there wasn’t much during the time.  The Sovereign Debt problems get headlines. Credit Problems get headlines, even for relatively small countries like Greece. Big Credit Headlines can crater the stock market as everyone now knows.  What is market action from the headlines?

Since it is Earnings Season, I wanted to look at the stocks that have already reported to get a sense of the volatility and movement action outside of earnings. I wanted to take the earnings announcements out of play (that is another level of complexity for another day).  Market drops like yesterday’s usually open up an opportunity in option volatility.  The landscapes you see are filtered for companies that have reported this April.  First I looked at the Financial Stocks, and many of the big names are trading close to their 1 month lows (Right)- JPM, CS, DB, BLK, NTRS, GS (The tall red buildings in the front).  At the same time I wanted to look at 10 Day Put Implied Volatility (IV10) versus the 60 Day Historical Volatility (HV60) (Left) to look for overvalued options after all of these down moves.  I am looking for the IV10 to be at least 30% above the HV60 to consider selling any options in the short term.   The Credit Issue with Greece (is this the second or third time this year?) makes me want to keep track of these names a little more closely since the Financial Stocks get the early brunt of the action.  Let’s see if anything pops out.

 

This morning with better news on Greece, the financials are all up.  My idea of this decline being more news driven seems to play out.  I also wanted to see a bounce.  The Big Financial names are showing a little pop as of this writing.   I see JPM as a bit of an outlier in terms of the 10 Day Put Implied Volatility versus the 60 Day Historical Volatility (IV10 is 1.3x HV60) in the Big Financials I was watching.  The combination of close to 1 month lows and more advantageous Near Term volatilities makes the Out of the Money Put Spreads (42/40) in May look like a good choice to pick up the next bounce.  For Investors interested in a quality financial name (JPM) at a relatively good price this is a good time to take a look.

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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Is the News Sentiment improving for Goldman?

The bad news surrounding Goldman Sachs (GS) right now reminds me of when the Bank of England said they would support the Pound and George Soros bet that it would crater.   Someone was right and someone was wrong and there was a bit of noise afterward.  Successful traders see something where others don’t and then they act.  How many Wall Street CEO’S got canned for loading up on Sub Prime Securities?  It was fashionable to leverage a balance sheet for the easy carry trade in 2006.   A few successful investors saw this as unsustainable and bet against it.  Now Goldman is in the hot seat for facilitating a trade (bringing together a buyer and seller) when there were plenty of buyers of subprime securities at the time.    The news has been bad for GS in the short term and the system will take it’s course. In the meantime, let’s analyze the news since last Friday and see how that has effected option volatility for GS.  

 
Above:  Each building represents a News Story as an item, so  you don’t have to sift through the news, the News Sentiment Scores from RavenPack when displayed in AlphaVision do that for you.  The tall, purple stories (Very Bad News Sentiment, High Market Impact Score) are the initial wave of bad news about the SEC investigation 5+ days ago.  Notice as you move to the lower left (closer to today) the subsequent Bad stories had less impact (shorter, purple buildings) and then the news turned to Neutral and downright Positive (green) because of Earnings and Revenues.  The flow of “new” bad news has slowed to a trickle.  What does that mean for the options?

 
At first on the big down move, the Implied Volatility in the options leapt last Friday.  No real surprise and it has been well covered.   Looking at the Option Landscape above as the week progressed, better news meant lower option volatilities by April 19th.  Taking a snapshot of option market activity at the end of the day, Red Buildings mean declines in Implied Volatility in the 2^nd Month (Next Term) Puts (there was a one strike exception).  With this view representing mostly Out of the Money Puts , the decline was pretty consistent and shows a reduced perception of risk from the day of the SEC announcements to today.  The markets are digesting all the available information.  The effect of better news about GS is starting to push the volatility back down from its recent highs…at least for this week.

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Is Risk Declining Everywhere?

To answer that question first I have to describe the risks.  For this case I will use the Credit Default Swaps (CDS) Spreads  and Implied Volatility in option prices to help me.  These two derivative markets reflected the story very well in 2008 and 2009.  There is too much information for any person to watch all at one time, even using multiple screens.  I wanted to create a market view to show many risk factors at once.  Since the Greek debt crisis becomes an on again/off again headline, I was curious to see how that is effecting the optionable universe of names I follow.  For my sample I will proxy Credit Risk by the Percent Change in 5 year CDS Par Spread. If the market sees more credit risk those spreads go up.  If the market sees less credit risk, those spreads go down. 

This View looks at Percent Change in 5 Year CDS Par Spread, and the difference between 12 Month Implied Volatility 6 months ago and today.  What these different data points create is the scene 6 months ago (prior to Greece in the post Meltdown recovery) and right now.    The risk, measured by 5 Year CDS Par spreads, is going up in the lower volatility names in the Equity Universe that trade listed options.  Those lower volatility names (short red/purple buildings in the front) are the more Blue Chip companies- I highlighted DELL, HPQ CSCO, IBM and MO.  The higher volatility names (taller, green buildings in the back) are showing marked declines in risk.   There looks to be two faces, one for lower volatility companies and one for higher volatility companies.

In General:

- CDS spreads for less volatile stocks have gone up in the last 6 months. 

- CDS spreads for the more volatile stocks have come down.

The ongoing Greek situation (remember 1998?) seems to be spilling over to the quality end of the corporate credit risk market.  Traders are assigning more risk in the higher quality names of the CDS market even when the implied volatility in the equity market is steadily driven down.

It takes only a few minutes to construct these views in AlphaVision (I could not do this in a spreadsheet).  Data provided by Bloomberg.  www.aqumin.com

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Getting Behind the VIX – a New Look

During  the recent market run up, the VIX  has dropped to new lows of the year (just around 16+).  The VIX is a 30 day forward look at the Implied Volatility of the  S&P 500 Index Options (SPX) and a popular sentiment for market volatility overall (http://www.cboe.com/micro/vix/introduction.aspx) .  My quick and dirty indicator is as follows- Boring Bull Market VIX is 7-13, Internet Bull Market VIX is 13 -20+,  Panic VIX is 30+, Near Financial Collapse VIX is 75+, 1987 Crash VIX is 100+.  Right now we are not really in any of those general categories but the hangover of the Credit Crunch is alive and well (not exactly a Boring Bull) with the market making highs for the year.  Does the VIX look likely to continue moving down?

Let’s look at the  individual components of the S&P 500 with earnings season in full swing.  In AlphaVision, I set up a landscape of the S&P 500 with a ratio of the At-the-Money (ATM) Near Term Implied Volatility/ HV10 (10 Day Historical Volatility) to compare Implied Volatility (of the options) to Historic Volatility (of the stock).  Green buildings have the option volatility trading a premium versus a 10 Day Historical of the individual stocks.  Diagonally moving across the landscape from left to right  the degree of overvalued implied volatilities start to decrease (the landscape gets less green and more red) and the underlying stocks are moving more than the Implied Volatility of the options would suggest . 

From this View, most (70%) of the Near Term Implied Volatility looks overpriced relative to the movement of the underlying stocks in the S&P 500 and probably reflect earnings season.   CPWR, for example,  has an ATM Near Term IV of 56 but only a HV10 of 12.   Any sign of a benign earnings season will make those extra premiums (and the VIX) come down closer to  where stocks are actually trading.  Stocks in the S&P 500 have to move a lot to support the way traders have the options priced right now.

 

To request a custom analysis of market data using AlphaVision, please contact Aqumin at support@aqumin.com.

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Riding the Wave of Positive Sentiment and Momentum

  Are there different ways to show Momentum in a stock?  Consider the amount and quality of News Sentiment in a stock that is moving up. Best Buy (BBY) recently is leading all Retailers in the quality (top 4) and quantity (number 1) of News Sentiment on a 1 week moving average (BBY is near the top of retailers in News Sentiment on a 1 month Moving Average-not pictured).  Notice in the large market view (Above: News Sentiment-All Industry Groups) that BBY, has one of the highest positive sentiment scores for a company with a large volume of stories across the entire market (big green buildings in the lower left hand corner of each Industry Group).  Is it too late to ride the wave of Positive Sentiment and Momentum?

Now compare the recent price movements to the rest of the Retail Industry Group ( Below: Ratio of Current Price to Price Performance and 6 Month Price Chart).

 

Dark Green companies lead the Retail Industry group in trading above their 50 Day Moving Average.  Our Sort shows BBY is still in the top 3^rd.  Also note that while the performance of BBY was positive over the last month, it does not stand out as getting ahead of itself. The Halo Effect of having iPads in Best Buy, while reported, has not yet been reflected in the stock price.  My take is that at 13x earnings there is room for BBY to run.

For a Sentiment Analysis of a Portfolio or Industry Group using AlphaVision, please contact Aqumin at support@aqumin.com

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Sifting through Cramer’s Picks in Natural Gas

I caught Jim Cramer’s show (mad money on CNBC) last week where he talked about Devon Energy (DVN)- Buy!Buy!Buy! - Natural Gas in general http://www.cnbc.com/id/33509810/Cramer_s_Top_10_Natural_Gas_Stocks?slide=2.  It made me want to go to the Mad Money website and see what other Natural Gas stocks Cramer thinks will benefit from rising Natural Gas prices.  Seeking a way to pick the best of the 10 and generate a little yield, while Natural Gas prices hover in the $4 range, I loaded his 10 picks to see what would pop out (XTO, CHK, APC, DVN, UPL, EQT, RRC, HAL, CLNE, FSYS) for Option Yield and Performance Relative to the S&P 500.  I filtered for stocks that have underperformed the S&P 500 (given the decline of Natural Gas prices over the last year.  4 of Cramer’s picks outperformed the S&P 500 over the last 52 Weeks- CLNE, FSYS, HAL, APC).  Then I looked for Option Yield by indentifying the 2^nd Out of the Money (OTM) Call in the 3^rd Expiration Month (Far Term).  On the landscape below (Left Side), all the Green stocks have an option yield of at least 3.5% until June/July and have underperformed the S&P 500 over the last 52 Weeks.  I look for stocks that have recently underperformed as one of the criteria for initiating a buy write (the market has already given you the cheaper entry point). Option Yield Performance:  Green is higher yield (over 3.5%) and Red is lower yield (under 1.5%) and Tall buildings have higher 52 Week Price Performance Relative to the S&P 500.

 

One Month News Sentiment: Green Positive News Sentiment Score, Red Negative and Tall Buildings (Top of the horizon) More Positive Scores, Tall buildings (under the horizon) More Negative Scores.

On a yield/underperformance basis, CHK, UPL and RRC looked like the best of the group.  I decided to add one more indicator (News Sentiment Scores – Above Right) since I found that UPL was suffering from recent bad news (One Month Short Term Sentiment Score) and has yet to uptick (note the plunging red building, worst of the group in a poor environment for Natural Gas in general).  CHK (Chesapeake Energy Corp.) looked to have slightly improving News Sentiment (One Month Short Term News Score) of the Goldilocks Variety, not to hot, not to cold, and would best fit my strategy.  I included a two year price chart for CHK to see what the future might hold with a rise in Natural Gas Prices (CHK made a 5 year high at the top of the Natural Gas market in the early second quarter of 2008 ). While long term potential looks positive, it is nice to have some yield in the short term.

Created in AlphaVision with RavenPack News Sentiment Scores and option data from Hanweck and ACTIV

To use this view, download AlphaVision Professional, then download both views (Far Term OTM2 Call Yield and One Month News Score from our View Library.  Your AlphaVision subscription must include RavenPack data for the News Scores (call us for a free trial).

If you need assistance, just email support@aqumin.com or call 713-781-2121.

For more research on using News Sentiment Reversals for trading go to:  http://ravenpack.com/research/sentimentreversalspaperform.htm

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Option Volatility Moving with News Sentiment

Color- Highest Short Term News Sentiment - Dark Green

Sort-  Higher Sentiment Lower Left, Lower Sentiment Upper Right

Height- Taller Buildings have Higher Volatility

Look for: Tall stocks in the lower left hand corner (dark green) having the greatest One Week News Sentiment Score and the highest ATM Far Term Call Implied Volatility.  Shorter stocks in the lower left hand corner have lower volatility.  This View was filtered to  only display stocks with recent (1 week) positive news scores vs. long term (1 month) negative news scores.

Summary:  This View makes it is easy to see if any uptick in Sentiment is combined with high Volatility in option pricing.  A standout is DNDN (see price chart), where the News Sentiment, Stock Price and Volatility have all moved up.  With drug trial news coming, it might be good to take advantage of DNDN's current conditions and take profits now.

Created in AlphaVision with RavenPack News Sentiment Scores and Hanweck Option Data

To use this view, download AlphaVision Professional, then download and open the View from this link:  Hype Landscape.aqv.  Your AlphaVision subscription must include RavenPack  data (call us for a free trial).

If you need assistance, just email support@aqumin.com or call 713-781-2121.

For more research on using News Sentiment Reversals for trading go to:  http://ravenpack.com/research/sentimentreversalspaperform.htm

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Finding Opportunity in News Sentiment Lows

Color: 1 Month Short Term News Sentiment Score – Green High, Red Low (RavenPack News Sentiment)

Sort: 1 Month Short Term News Sentiment Score – Lower Left High, Upper Right Low

Height: 1 Month Short Term News Sentiment Score – Tall is Low

These views show relative News Sentiment Score Highs (in green) and Lows (in red).  Green Scores in the lower left hand corner of each subgroup are the highest for that group of equities.  Tall Red Scores in the upper right hand side of each subgroup are the absolute lows for the sub group.  The color score is relative to all equities that register a News Sentiment Number.  Very Green is a High (Positive) Sentiment Score and Very Red is low (negative) News Sentiment Score (relative to all scoring equities).

What to look for: Red stocks in the upper right corner of each sub group to identify an underperforming issue on two levels:  1. News Sentiment and 2. price performance.  Both need to be moving down to establish lows in these numbers. The next step is to identify early upticks.  The example here is Walgreens (WAG) on February 13^th, 2010 (See 2/13 Landscape).  In a relatively benign News Sentiment climate for the Retail-Drugs Sub Group, WAG stood out with very low 1 Month Moving Average (1 Mo MA) News Sentiment Scores and a stock price which essentially erased the rally of the last 6 months (See WAG Stock Price Chart).  By February 20^th the 1 Mo MA News Sentiment Score had improved to -1.6, the first News Sentiment Uptick and first buy signal.  With the current News Sentiment Score -.18, WAG is almost back to Neutral News Sentiment and the stock has bounced of off its lows (See 3/9 Landscape).

To use this view, download AlphaVision Professional, then download and open the One Month News Score View from this link:  One Month News Score.aqv.  Your AlphaVision subscription must include RavenPack  data (call us for a free trial).

If you need assistance, just email support@aqumin.com or call 713-781-2121.

For more research on using News Sentiment Reversals for trading go to:  http://ravenpack.com/research/sentimentreversalspaperform.htm

Terms of Use and Disclaimer