Tuesday, July 13, 2010

Ultra Long S&P 500 (SSO) - A Huge Gamble or a Huge Hedge?

SSO (Ultra S&P 500) is trading $36.21, up 2.5% with IV30™ down 3.1%. The LIVEVOL™ Pro Summary is below.

Eddy Altamirano, a reader and trader, found this one for me.

The leveraged ETF has traded over 39,000 options in the first two hours on total daily average option volume of just 23,708. All but 7,627 contracts have been puts yielding a 4:1 put:call ratio. The action, in small trades, has been over 22,000 July 35 put purchases. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that the puts are mostly opening (compare OI to trade size). Note that expiration is in just five days.

Given that expo is so near it does make me wonder if this trade is opening to hedge, or opening to gamble. I could make a good argument for both. It feels like a hedge b/c expo is so soon... But then again, it also feels like a gamble b/c expo is so soon. Hmm...

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.

This is actually kind of normal skew for the leveraged ETF. July downside looks so bid because of the leveraged effect combined with expo; though it may be a bit pronounced right now.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

We can see the amplified upswing in the market recently following an amplified down turn. Note that IV30™ is just now coming down to touch HV20™. You can also see the red coloring of the volume bar at the very bottom - that's the ISE sentiment indicating opening order put purchases from cust accounts.

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment