Friday Roundup: Quiet VIX, Shake Shack Clucks, And More

Random thoughts on the CBOE Volatility Index (VIX), Shake Shack Inc (SHAK), David Letterman, and more

by Adam Warner

Published on May 22, 2015 at 9:35 AM
Updated on Jun 24, 2020 at 1:31 PM

It's Friday. It's Memorial Day weekend. It's … very likely to be really slow, as far as options go today.

Just a quick refresher before we get to the disjointed "random thoughts" section of our show. Options have time value. Not all time is created equal. Time that includes three days of no trading and a fourth day that contains very little trading and price action has way less value than four normal trading days. As such, traders tend to lower bids and offers into long weekends. This translates into lower implied volatility readings and declines in indexes like the CBOE Volatility Index (VIX) that proxy volatility.

Yada, yada, yada … we may see the 2015 VIX lows pierced again today, followed by a VIX "rally" on Tuesday, when the calendar itself catches up. It's not terribly meaningful; it won't really effect the tradable VIX complex.

Anyway, way back when, companies had to trade for a few months before their options listed. That's not at all true anymore; it takes like a week now, for most names. But not all names…

I'm not entirely sure which condition Shake Shack Inc (NYSE:SHAK) violates. I also don't care; let's waive it. It figures to be a very popular options series when it lists. Not to mention it's going to see some nice high volatility, and we could use that in a widely followed name.

While you're waiting for SHAK options to trade, I highly recommend eating an actual Shack Burger -- they're awesome. Not sure they're "5,000x earnings" awesome, but I know more about burger eating than proper burger chain valuations. And besides, it's not just burgers:

"Shake Shack is considering the launch of a Chick-fil-A killer, according to a company filing.

"The burger chain's subsidiary, SSE IP, filed an application to trademark the name 'chicken shack,' CNBC reports.

"That could mean the company is testing a chicken sandwich or a new chain with a chicken-based menu.

"Shake Shack hasn't revealed any details of its plans."

And after that? How about going after Sirius XM Holdings Inc. (NASDAQ:SIRI)? We can call it "Radio Shack." Then a foray into '80s pop music with "Love Shack." Followed by a white paper on NBA fouling titled "Hack a Shaq."

OK, sorry. Never mind.

I do have a white paper for you, though, h/t Alexander Aljechin. So don't tell me you have nothing to read at the beach this weekend!

"This working paper develops first a mean-reverting logarithmic model for the VIX. In the next step the relation between the VIX and VIX Futures is modeled. VIX Options are evaluated by Monte-Carlo Simulation of Option-Trading Strategies. The model is also applied to the VIX based ETN VXX and VXX Options and extended to the VSTOXX and VSTOXX Futures."

And finally, #ThanksDave. I'm talking the David Letterman from the Late Night NBC years -- he was just awesomely funny and off the wall. I'm not sure old clips would do it justice. It was just great.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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