Tread carefuly with ANZ and NAB

ANZ closed at $22.51 and NAB at $24.18 on Friday 16 Mar 2012.

Some warning signs are emerging by a couple of indicators.


1)Put/call ratio

ANZ’s  put/call ratio (number of puts traded outweighing calls) had been creeping  up in the last 2 weeks. Last week it ended with a p/c ratio of 0.93 from 0.88 the week before, climbing from low under 1 readings since early Dec.

2) Historical daily Implied Volatility (IV)

Rising p/c ratio is coinciding with ANZ’s plunging  IV since Feb to now in the teens.  On Friday (16 Mar12), it was at early 17.

Putting these two indicators together, the last time we had ANZ IV at teens and p/c ratio at 1.7 was in 8th and 9th Nov, when ANZ was at close to $22 before plunging to under $19 after that.

 A rising p/c ratio combined with a low IV looking like the early Nov peak,  is a warning sign.

 On Friday, observed a calendar bear call spread executed which makes sense if one holds this view (selling of Mar $2250 call and buying of Apr $23 call).


 1 Put/call ratio

NAB’s p/c ratio has been creeping up as well. Last two weeks they had been at 1.07 and 1.05. Again, they have risen from low under 1 numbers since early Dec 11.

2  Historical daily Implied Volatility (IV)

In terms of volatility, quite similar to ANZ as well. Plunged to the teens of about 19. The last two times NAB’s IV was at 19 were on 8 Nov and 22 July when the share price was above $25 before plunging from there. As NAB is still shy of $25 now, it could mean two things, either the IV stays low for a while more whilst share price continue to rise to above $25 before turning down or this time, the peak is  shallower than the last two peaks. The former may be a stronger case.

 In any case, warning signs of a potential turning point (downwards) have emerged.  Though may not be immediate, cautiousness is required.