June on the go

Against analyses, analysts, predictions, divinations and commentaries, this bull is exercising its unpredictable strenght, as the US markets record new historical highs.
SP500 is approaching 2000.. wow
usa500jun14daily

 

 

 


My low-risk, ETFs portfolio has been granted, since the beginning of the year, a nice return on capital, as India, China, USD and TRY bounced back and major indexes keep going UP. As you know, I am short EUR/USD since I owe a Lombardy region bond USD 5.8 @ 101 cost basis that is now worth 106 approx and since I converted a nice amt of my liquidity with interactive brokers. I am also long TRY/EUR with a ZC 2022 turkish bond.

Moreover, Italian spread on BTP/BUND crashed recently to historically low levels: our local bond market consequently rallied

btpbund

Please consider it reached 600 during 2011 financial crisis!

Now, the IBEX.
As you may notice, I am flat as I was expecting a rapid surge in implied volatility, coupled with the “sell in may” motto. I still do have to recover 80 euros for 34 DOTM puts with mixed expiration dates (sept and dec).

Instead, implied volatility holds to a descending pattern:impliedvolatility

and the IBEX index conversely raises (the two days chart is indeed very fractal for what has happened during the last month):

esp35jun14m15

Let’s analyze now the options market.

Friday volumes on ATM calls are high
tradedcontractsyesterday

which resulted in a lower open interest on such strike for both the same day and the entire week, as you may notice:
onedaydeltajuneoneweekdeltajune..though the options market on june expiry goes deeply unbalanced as ITM calls breach 60%, whilst as you may see the equilibrium is situated at 10200!
balancejune
(credits to Antonio Zorri aka AZ13)

It is normal to expect this unbalance to be absorbed, either by rollover of ITM calls and/or delta-hedge with long futures, and the related open interest is at least expected to increase. Conversely, we could expect a sudden sleight of hand of sbdy to intervene and reject the price towards its mean. In this case the open interest of the future should decrease, as delta-hedge isn’t required anymore.

It’s time to exercise some patience. Yeah, again.

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