June 6, 2017

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Jun 6, 2017 - Most of the Moves in Just 7 Stocks? The benchmark S&P. 500 has a capitalization of around 21 trillion
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June 6, 2017 Most of the Moves in Just 7 Stocks? The benchmark S&P 500 has a capitalization of around 21 trillion dollars and this amount has risen by approximately 1.5 trillion since the beginning of the year. If we look at only seven stocks (AAPL, GOOG, MSFT, AMZN, FB, NVDA, NFLX) in the index, their capitalizations have risen by nearly 700 billion dollars – or roughly 50% of the returns of the S&P 500.

example, the period from Oct 1999 to March 2000: the Nasdaq, led by tech stocks, increased 106%...

Tech's On a Tear; Oil, Not So Much. As seen from the plot on the bottom of the page, since the beginning of the year Technology (XLK) is up 18%. In comparison, Retail (XRT), Oil

While we typically see an inverse relationship between implied volatility and price, it hasn’t been the case in these high-flying stocks. Even though these stocks are at all-time highs, implied volatility is considerably high. If you own these stocks, possibly consider selling calls against your positions. Description Apple (AAPL) Alphabet (GOOG) Microsoft (MSFT) Amazon (AMZN) Facebook (FB) NVIDIA (NVDA) Netflix (NFLX)

Capitalization (in Billions) 803 680 558 483 445 88 71

Increase Since Jan 1 32% 26% 16% 35% 32% 46% 30%

IV Rank 40 40 54 39 36 37 29

For those who are not long, feel the market is overbought, and are comfortable taking the risk, a nice possible return on capital can be had selling calls. We would tend to lean toward defining the risk since markets can continue significantly higher. Take, for

Services (XLE) and Nat. Gas and Oil Exploration & Production (XOP) are down -6%, -13%, and -22% respectively. Michael Rechenthin, PhD Kai Zeng [email protected] 18% - Technology (XLK) 9% - S&P 500 (SPY) 5% - Bonds (TLT) 1% - Financials (XLF) -6% - Retail (XRT) -13% - Oil Services (XLE) -22% - Nat. Gas/Oil Prod. (XOP)

  Below we have select S&P 500 stocks with an upcoming dividend. In the money short call options are the only options at risk of additional early assignment due to the dividend. If the extrinsic value of the in the money short call is less than the dividend, the option is at (a greater than average) risk of being assigned. Symbol VFC ADI ANTM GM CME WMB PEG RF ADP CBS PPL COH KMB OXY RAI AIG APC HPE HPQ DVN RRC KO M VIAB EMN BBY MO MRK MSI TMO ZTS GILD AME CCI FIS ICE NDAQ NOV WU BBBY

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Description V.F Corp. Analog Devices Anthem General Motors CME Group Class A Williams Companies Public Service Enterprise Group Regions Financial Corp. Automatic Data Processing CBS Corp Class B PPL Corp. Coach Kimberly-Clark Corp. Occidental Petroleum Corp. Reynolds American American International Group New Anadarko Petroleum Corp. Hewlett Packard Enterprise HP Devon Energy Corp. Range Resources Corp. Coca-Cola Macys Viacom Class B Eastman Chemical Best Buy Co. Altria Group Merck & Motorola Solutions Thermo Fisher Scientific Zoetis Class A Gilead Sciences AMETEK Crown Castle International Corp (REIT) Fidelity National Information Services Intercontinental Exchange Nasdaq National Oilwell Varco Western Union Bed Bath & Beyond

Ex-Dividend Date Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Wed, Jun 07 Thu, Jun 08 Mon, Jun 12 Mon, Jun 12 Mon, Jun 12 Mon, Jun 12 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Tue, Jun 13 Wed, Jun 14 Wed, Jun 14 Wed, Jun 14 Wed, Jun 14 Wed, Jun 14 Wed, Jun 14 Wed, Jun 14 Wed, Jun 14 Wed, Jun 14

Michael Rechenthin, PhD | Kai Zeng

Dividend Amount 0.42 0.45 0.65 0.38 0.66 0.3 0.43 0.07 0.57 0.18 0.395 0.338 0.97 0.76 0.51 0.32 0.05 0.065 0.133 0.06 0.02 0.37 0.377 0.2 0.51 0.34 0.61 0.47 0.47 0.15 0.105 0.52 0.09 0.95 0.29 0.2 0.38 0.05 0.175 0.15

Payment Date Mon, Jun 19 Tue, Jun 20 Fri, Jun 23 Fri, Jun 23 Mon, Jun 26 Mon, Jun 26 Fri, Jun 30 Fri, Jun 30 Sat, Jul 01 Sat, Jul 01 Mon, Jul 03 Wed, Jul 05 Wed, Jul 05 Fri, Jul 14 Mon, Jul 03 Wed, Jun 28 Wed, Jun 28 Wed, Jul 05 Wed, Jul 05 Fri, Jun 30 Fri, Jun 30 Mon, Jul 03 Mon, Jul 03 Mon, Jul 03 Wed, Jul 05 Thu, Jul 06 Mon, Jul 10 Mon, Jul 10 Fri, Jul 14 Mon, Jul 17 Fri, Sep 01 Thu, Jun 29 Fri, Jun 30 Fri, Jun 30 Fri, Jun 30 Fri, Jun 30 Fri, Jun 30 Fri, Jun 30 Fri, Jun 30 Tue, Jul 18 Page 2 of 7

 

Below are the segments that got among the highest views per day. Date Tue, Jun 06

Mon, Jun 05

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Wed, May 31

Tue, May 30

Segment Market Measures Options Jive Strategies for IRA Market Measures Options Jive Best Practices Market Measures Options Jive Closing the Gap - Futures Edition Market Measures Options Jive Trades From the Research Team LIVE Market Measures Options Jive Best Practices Market Measures Options Jive Market Measures

Title Naked Premium Profit Margins What To Do When VIX is Low Mo Condors, Mo Choices OTM Premium vs. ITM Premium Time Spreads and Their Vegas Adjusting Iron Condors What To Do With Quick Winners When the Market Makes New Highs NOB Spread: Time for a Turn? Batman vs. The Strangle Trading When Time Permits Trades From the Research Team LIVE Batman vs. The Strangle Poor Man's Covered Call: Varying Durations Going Inverted How Often Are We in High IVR? Condors: Iron vs. Regular Recovering From Losses: Defined & Undefined Risk

Earnings trades offer investors opportunities in stocks with the largest potential of a volatility contraction the day after a company announces their quarterly earnings report.

Symbol

Description

Expected Date

Release Time

KR

Kroger Company

Thu Jun-15

Before Open

Market Cap (Billions) 27.5

Weekly Options No

Economic announcements have the ability to move specific sectors of the economy. Below we list a few of the larger ones along with their release times. Date Wed, June 7 Thursday, June 8 Friday, June 9

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Time (CDT) 20:30 9:30 6:45 7:30 7:30 11:00

Economic Report GDP Growth Rate Crude Oil Inventories ECB Deposit Facility Rate (Jun) UK Election. Results Thursday afternoon. European Central Bank's Draghi Press Conference Employment Change World Agricultural Supply and Demand Estimate Report

Michael Rechenthin, PhD | Kai Zeng

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This is our broad view of the market ranging from stocks to bonds to currencies.

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Michael Rechenthin, PhD | Kai Zeng

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  Exchange-traded funds (ETFs) are securities that trade like stock while tracking indices, commodities, bonds, and baskets of assets. We are tracking these ETFs because of the opportunity they present and the liquidity they exhibit.

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Michael Rechenthin, PhD | Kai Zeng

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  These are a few of the individual stocks that we have on our radar. Always be aware of expected earning date when choosing your expiration. Individual stocks do have more risk of sudden moves - make sure you are compensated for the risk.

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Michael Rechenthin, PhD | Kai Zeng

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Reading this Report Expected Range Cone. The following pages show stocks and ETFs that the tastytrade Research Team currently find have relatively high or low volatility. The colored cone represents a 30-day expected theoretical price range that is calculated from the options’ implied volatilities. If the implied volatility is relatively high, then the market is expecting a larger price change in the underlying stock or ETF. From this we can derive the market’s 1 standard deviation theoretical expectation of where prices might be in the future. In other words, the market is expecting, with a 68% theoretical probability, that prices will fall within the boundary of the cone at the end of 30 days.

Cone Color. The color of the cone is significant. The darker the color, the

more “extreme” the implied volatility (IV) which is represented by implied volatility rank (IV Rank). This information can help you decide on a trading strategy.

Glossary IV. Implied Volatility is the estimated volatility of a security’s price derived from its option price; the higher the IV, the more expensive the

option and therefore the larger the expected price move. IV is an annualized number of volatility, e.g. a IV of 27 means the option’s market is pricing in an annualized price range, either plus or minus, of 27%.

IV Rank. IV by itself doesn’t tell us if if the volatility is high or low - but IV Rank does. An IV Rank of 70 means that the IV is 70% between its low and high IV over the past year. The higher the IV Rank, the higher the security’s IV is compared to its past year. We provide six levels to make evaluating easier: • Extremely High: IV Rank between 90 and 100 • High: IV Rank between 75 and 90 • Moderately High: IV Rank between 50 and 75 • Moderately Low: IV Rank between 25 and 50 • Low: IV Rank between 10 and 25 • Extremely Low: IV Rank between 0 and 10

Option Liquidity. At tastytrade we have our own theoretical measure of option liquidity, Poor, Moderate, Good, or Great. It examines the options’ bid/ask spread, open interest, and the number of strikes with non-zero bids.

Correlation with S&P 500. Correlation is a statistical measure of how strong a relationship two securities have with one another. A correlation of -1 means the stocks are perfectly negatively correlated (they move in opposite directions), while a correlation of +1 means the stocks are perfectly positively correlated (they move in the same direction). A correlation of 0 means there exist little relationship.

Earnings. The earnings date of the security. In practice we tend to see stocks have a larger amount of implied volatility (IV) nearer to

earnings as the market is pricing in the fear of the upcoming earnings announcement. In parethesis, is BTO or AMC; "Before the Open" or "After Market Closes", respectively. Upcoming earnings dates do sometimes change.

Disclosures tastytrade content is provided solely by dough, Inc., and is for informational and educational purposes only. All volatility, probability, liquidity and correlation numbers are purely theoretical in nature, and are for illustrative purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures, transaction or investment strategy is suitable for any person. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. tastytrade or its parent, dough, Inc., does not provide investment or financial advice or make investment recommendations, nor is either in the business of transacting trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives.

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Michael Rechenthin, PhD | Kai Zeng

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