Mike Khouw of CNBC always reminds me to sell options when volatility is high and buy options when volatility is low. Well we have seen some volatility this past week and for sellers of options, our premiums collected have been nice. The VIX closed the week at 19.87 about 27% increased from this time last month.
Check, time to start selling options, but how do you get edge with this knowledge.
When volatility increases, stocks are usually decreasing and could decrease even further. Well the edge is to sell those options when the volatility begins to level off. When this happens stocks generally have stopped their downward momentum. And selling those puts spreads at that time works better.
I Look at the VIX weekly close to see the rate of change and when I see a decrease in the rate of change, I begin to look at where I can sell some options to bring in my income.
There is a lot out there pushing the market around and volatility has increased. If you are going to sell some options, make sure you have a plan.
Happy Monday. Good Luck out there this week.
Global Spotlight
“Who is our bigger enemy, Jay Powell or Chairman Xi?” U.S. President Donald Trump’s Aug. 23 Twitter rage against China and U.S. Federal Reserve Chairman Jay Powell goes to show how the president’s trade policy is stuck in a loop: His trade war with China, at 18 months and counting, is taking its toll on the global economy, and U.S. bond markets are sending out distress signals.
Trump’s Next Moves Against China. Trump announced that he would be raising existing tariffs on $250 billion worth of Chinese goods from 25 to 30 percent on Oct. 1 and increasing duties on a remaining $300 billion in imports from 10 to 15 percent starting Sept. 1 — some of those tariffs have been delayed to Dec. 15 to avoid hitting U.S. consumer prices during the holiday shopping season.
The G-7 Watch List. While central bankers at Jackson Hole, Wyoming, have been telegraphing to the world that they alone cannot save their economies from trade uncertainty, don’t expect much reassurance from political leaders gathering in France for the G-7 summit.
The Hong Kong Airport “Stress Test.” Many observers breathed a sigh of relief early this week following large, but mostly calm protests in Hong Kong last weekend. But pay attention to who is leading the demonstrations: While the umbrella Civil Human Rights Front marches tend to be more peaceful, the student-led actions have much higher potential to trigger violence and also create more backlash to their movement.
Italy and Brexit Watch. Aug. 27 will be a big day for both Italy and the United Kingdom. We should know by then whether Italy’s anti-establishment Five Star Movement and the center-left Democratic Party will be able to form a coalition government to stave off a general election and leave the Euroskeptic League party in the cold.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- Second quarter earnings are expected to increase 3.2% from 18Q2. Excluding the energy sector, the earnings growth estimate is 3.9%.
- Of the 482 companies in the S&P 500 that have reported earnings to date for 19Q2, 73.9% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 76%.
- 19Q2 revenue is expected to increase 4.7% from 18Q2. Excluding the energy sector, the growth estimate is 5.1%.
- 57.1% of companies have reported 19Q2 revenue above analyst expectations. This compares to a long-term average of 60% and an average over the past four quarters of 63%.
- For 19Q3, there have been 63 negative EPS preannouncements issued by S&P 500 corporations compared to 26 positive, which results in an N/P ratio of 2.4 for the S&P 500 Index.
- The forward four-quarter (19Q3 –20Q2) P/E ratio for the S&P 500 is 17.0.
- During the week of August. 26, 14 S&P 500 companies are expected to report quarterly earnings.
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