Small caps had a good week last week as the Russell 2000 (RUT) rose about 2.5% which places it up 1.67% for the year. The large cap focused Russell 1000 (RUI) was up just under 1% and is not up 4.96% for 2017.
VIX has worked higher as geopolitical risks have risen in the past couple of weeks and the Russell 2000 Volatility Index (RVX) has done the same. The result is a lower RVX to VIX risk premium, with this measure actually closing at a 2017 low on Friday.
On Friday there[...]
The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX Index and volatility-related articles from print, broadcast, online and social media outlets.
S&P 500 (SPX ) Options Volume
Average daily volume (ADV) for SPX options is up for a fifth consecutive year.
ADV for SPX options rose to 1.18 million contracts in the first quarter of 2017, up 15% over the first quarter of 2016.
Open interest for SPX options was 14.5 million contracts[...]
April VIX was retired last week and May became the front month. We have a volatility event this weekend which has resulted in a bit of front month vs spot VIX backwardation. I have a feeling that will not be the case as the election results are digested starting Sunday night.
The curve below shows VSTOXX versus the available VSTOXX futures contracts. Like VIX, April VSTOXX was retired with a settlement level in the mid-20's. Backwardation is a bit more obvious here which[...]
The VXST – VIX – VXV – VXMT curve is a textbook, “here’s what it looks like in front of an event”. The event being the first round (yes it doesn’t end Sunday) of the French Election. We will know when the markets open Monday morning who the two finalists are to be the next Presidence del al Republique. I do expect VXST to fall back in line come Monday morning, either with the longer dated contracts rallying but more likely due to VXST dropping[...]
We hit the busiest part of earnings season this week. The stocks below have Weeklys available for trading and the numbers represent the last 12 quarters of one day price reactions to their announcement (with one exception - PYPL). As always double check the dates as none have been confirmed.
Who wants to buy high and sell low? Why would anyone buy calls before the closing bell and sell them to someone for half price the next morning when the opening bell rings? When would anyone feel okay about buying for 88 cents and then selling for 45? Answer: When the calls are just a wrapper, a box designed to keep something else safe while in transit, like a shoe box protects the merchandise on the delivery truck so that your purchase isn't thrown on the porch one shoe at a time[...]
Before the paint was really dry I started tinkering with the reverse collar set up yesterday. The first thing I did, acting upon a suspicion (you could call it a wish) that the VIX would sift downward the next day (which is today, as I write this), is that I closed the short put. To recap the spread, it was as such, all of it opened yesterday, April 18th:
Shares of UVXY sold short at 19.48
Put for the April 21st expiration, 19.00 strike, sold short for 0.62
Call for the April 21st expiration,[...]
The first round of the French Election occurs this coming weekend and the implied volatility of broad based options in Europe is taking notice. The European version of VIX is VSTOXX which is based on Euro Stoxx 50 Index options. Today VSTOXX closed over 24.00 as Euro Stoxx 50 options are pricing in high volatility over the next few weeks in anticipation of the market’s reaction to the French Election.
The VSTOXX futures market also (correctly) anticipated a rise in VSTOXX[...]
Every once in a while I have to try something new, and that means choosing something different from the menu and forgoing that same old tried-and-true sandwich. What sandwich am I talking about? My own trademarked "strangle sandwich, which is no one's favorite but my own. It's a doozy; it's not for all tastes, and it might just fail and make you sick (and sorry you tried it.) Let me tell you what it is before I tell you what I opted for instead, today:
I like premium, so[...]
It's a showdown at the 'O.K. Corral', with the Federal Reserve on one side and the massive bond market on the other side. They have both taken positions, dug in their heels and for the first time in a long while they are staring each other down. It's not common we see divergences between these two factions, but that is indeed what we have currently. The stakes are high. Investors and traders are watching both sides carefully, but for now there is no clue - and that is why[...]
Earnings season is back in full swing. The stocks below have Weeklys available for trading and the numbers represent the last 12 quarters of one day price reactions to their announcement. As always double check the dates as none have been confirmed.
Today’s episode of What’s Trading details candy sales, the big business of Easter, and a July put seller in Mondelez International (MDLZ). The link to the video is below as well as additional commentary on the trade. Click here to watch the episode and continue below to learn more about the trade.
The payoff diagram below shows the potential P&L if someone was short (sold) ONE July 40 put in MDLZ for $0.77 and held the position until expiration. The maximum loss is considerable[...]
Click here for today's WT Episode then read below for a little more info on today's trade.
Today’s What’s Trading episode was a discussion on an earnings trade in Wells Fargo. When evaluating an earnings trade, or any trade for that matter, history is a good place to start. In this video we examine the benefits using earnings history as a barometer for the likelihood of these options not only being in-the-money but potential being profitable.
I was discussing the current state of the markets with a trader today and noted that VIX is perking up based on the uncertainty surrounding the upcoming French election. He challenged me on this and said the geopolitical situation had more to do with the recent rise in VIX, not the French election. I know I’m right and the picture below proves it.
Above is a depiction of the at the money implied volatility for SPX options expiring each Monday, Wednesday, and Friday for the[...]
Today’s What’s Trading episode was a discussion of a big put buyer in TWTR. A link to the video is below.
Click Here for Today's Video
The payoff diagram here shows the outcome of this trade if it is held until September expiration. The maximum loss is limited to the price paid for each put. Profits can be earned below the break-even point of 11.45.