With 3Q earnings reporting underway this seems this like a good time to update and expand upon Digest Issue 39 “Volatility Kings 3Q 2017 [Charts]” with another look at Netflix (NFLX) scheduled to report after the close today. First a brief market review.
S&P 500 Index (SPX) 2553.17 advanced 3.84 points or +.15% for the week after making a new closing high Wednesday at 2555.24 and new intraday highs every day except last Monday. While it appears overbought and overdue for a cyclical pull back most indicators remain bullish. In the event of a pullback the first support is 2508 and then the 50-day moving average at 2488.
CBOE Volatility Index® (VIX) 9.61 declined .04 points or -.41% for the week while our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option at 6.20 declined .27 points or -4.17%.
VIX Futures Premium
The chart below shows as our calculation of Larry McMillan’s day-weighted average between the first and second-month futures contracts.
With just 2 trading days until October expiration, the day-weighted premium between October and November allocated 10 % to October and 90% to November for a 21.96% premium, right near the middle of green zone between 10% and 30%.
21.96% vs. 23.68% week ending October 6.
The premium measures the amount that futures currently trade above or below the cash VIX, (contango or backwardation) until front month future converges with the VIX at expiration.
Nexflix, Inc. (NFLX) 199.49 advanced 3.63 Friday and up 1.47 points or +.74% for the week, but up 20.30 points or 11.33% from October 3 when it bounced off the 50-day moving averge quickly advancing in anticipation of the 3Q earnings report today after the close. With a consensus earnings estimate of .32 and a whisper estimate of .34 the important revenue estimate is 2.97 bn. As usual speculators, traders and investors will all be closely watching the number of new subscribers added in the US and globally.
