• Trader Talk | Education | Nov 20, 2017, 10:42 AM

    Pricing Ratio Spreads - Comparing Expirations and Strikes with SPX and CMG

    Pricing Ratio Spreads - Comparing Expirations and Strikes with SPX and CMG

    Wednesday I conducted a webinar for Interactive Brokers discussing ratio spreads.  During the presentation I was asked about initiating 1 x 2 and what expirations and strike combinations would result in a credit.  Another stipulation was that the trade would buy one at-the-money option and sell two out-of-the-money options.  I wasn’t asked for a call or put spread, so I did both with each expiration.  With so many moving parts to that question I responded that I would investigate[...]

  • VIX | Trader Talk | Trade Ideas | Nov 18, 2017, 3:17 PM

    Weekend Review of VIX Futures and Options - 11/13/2017 - 11/17/2017

    Weekend Review of VIX Futures and Options - 11/13/2017 - 11/17/2017

    VIX showed signs of life last week with a move to the lower teens.  November settlement Wednesday morning came in at the highest level (13.79) since April.  However, when the week came to an end VIX finished only 0.14 higher.  The VIX futures rose slightly as well, with the farther dated futures uncharacteristically gaining more than the nearer dated contracts.  Monday with VIX around 11.50 and the November 29th VIX future at 11.90 a trader put on a position that looks like[...]

  • VIX | Trader Talk | Trade Ideas | Nov 18, 2017, 3:11 PM

    Weekend Review of Volatility Indexes and ETPs - 11/13/2017 - 11/17/2017

    Weekend Review of Volatility Indexes and ETPs - 11/13/2017 - 11/17/2017

    What the heck is going on with VXST on the chart below?  Basically Thanksgiving.  As a nine-day measure of SPX implied volatility this index takes into account options that have their implied volatility under pressure to adjust for extra time decay since we have Thursday off and a half day this coming Friday.  I have a funny feeling this time next week VXST will have fallen back in line (or contango) with the other indexes below.  The long funds were a bit lower last[...]

  • VIX | Trader Talk | Trade Ideas | Nov 18, 2017, 3:03 PM

    Weekend Review of Russell 2000 Options and Volatility - 11/13/2017 - 11/17/2017

    Weekend Review of Russell 2000 Options and Volatility - 11/13/2017 - 11/17/2017

    Small caps ruled the day last week as the Russell 2000 (RUT) rose 1.24% while the Russell 1000 (RUI) was down 0.11%.  For the year RUI is up over 15% while RUT still lags at up 10%.  The relationship between the Cboe Russell 2000 Volatility Index (RVX) and VIX remained at low levels as small caps were in favor.  I know hindsight is easy, but we can learn from it and the dramatic drop in the RVX / VIX ratio a couple of weeks ago may have been a precursor to the solid relative[...]

  • Bitcoin | Nov 17, 2017, 10:22 AM

    A Look at Cboe Bitcoin (USD) Contract Specs

    A Look at Cboe Bitcoin (USD) Contract Specs

    One of the most discussed topics in the financial world recently has been bitcoin and the technology behind bitcoin.  A few weeks ago Cboe Global Markets announced plans to launch futures contracts based on bitcoin prices and that process is undergoing regulatory review.  However, we do have the potential contract specifications available.  For those who want to get prepared for the launch of Cboe Bitcoin Futures here are some highlights. The underlying ticker will be XBT and[...]

  • VIX | Bitcoin | Nov 14, 2017, 9:43 AM

    Bitcoin vs. VIX - What Has Been More Volatile in 2017?

    Bitcoin vs. VIX - What Has Been More Volatile in 2017?

    Recently, Cboe announced plans to list futures contracts on bitcoin which is still in the works pending regulatory review.  Since that announcement I’ve been paying much more attention to the crypto currency space and even spent time with an 8th grader in my neighborhood who is mining ethereum.  In watercooler discussions at Cboe (which take place in our coffee shop), we were discussing the volatility of bitcoin and one smart guy said it was probably similar to VIX.  That[...]

  • VIX | Trader Talk | Trade Ideas | Nov 12, 2017, 4:19 PM

    Weekend Review of Volatility Indexes and ETPs - 11/6/2017 - 11/10/2017

    Weekend Review of Volatility Indexes and ETPs - 11/6/2017 - 11/10/2017

    S&P 500 volatility rose across the four volatility indexes based on SPX option pricing this past week.  The short side of the equation was up strong and the longer dated indexes (VIX3M and VXMT) had good weeks as well.  It may just be some concern is finally returning to the equity markets.   The long funds had solid weeks with the unleveraged ETPs gaining 3% to 7%, with the big winner being EVIX which is based on VSTOXX futures trading.  The short funds gave up almost the[...]

  • VIX | Trader Talk | Trade Ideas | Nov 12, 2017, 3:42 PM

    Weekend Review of Russell 2000 Options and Volatility - 11/6/2017 - 11/10/2017

    Weekend Review of Russell 2000 Options and Volatility - 11/6/2017 - 11/10/2017

    Small caps fell farther behind last week as the Russell 2000 (RUT) was down 1.37% while the Russell 1000 (RUI) was down only 0.24%.  For the year RUT is now up 8.71% while RUI has gained a very respectable 15.21%.  This time last week the CBOE Russell 2000 Volatility Index (RVX) premium relative to VIX was at 2017 highs.  Despite the fall off in RUT compared to RUI, the ratio experienced a pretty dramatic drop.  We are going to attribute that to the rise in VIX more than an[...]

  • VIX | Trader Talk | Trade Ideas | Nov 12, 2017, 12:20 PM

    Weekend Review of VIX Futures and Options - 11/6/2017 - 11/10/2017

    Weekend Review of VIX Futures and Options - 11/6/2017 - 11/10/2017

    VIX rose over 20% last week and the futures curve followed, but not nearly to the extent as the spot index.  The November contract goes off the board on the open Wednesday finishing the week at only a 0.31 premium to the spot index.  Usually the December contract is conspicuously low relative to spot VIX at this time of year as no one is concerned about the holidays and there are a few extra non-trading days associated with VIX around December expiration.  However, the over 2 point[...]

  • Cboe Benchmark Indexes | Nov 8, 2017, 11:41 AM

    Tech Sector Index is Top Performer in 2017, as Cboe Plans Launch of Options on Ten Select Sector Indexes

    Tech Sector Index is Top Performer in 2017, as Cboe Plans Launch of Options on Ten Select Sector Indexes

    One of the most frequent types of questions I receive from investors involves the topic of year-to-date performance.  Many investors are very interested in tracking how indexes have performed in the current year. As shown in the two charts below, of the ten S&P Select Sector indexes, the top and bottom performers in terms of price index returns in 2017 (through November 7) were the S&P Technology Select Sector Index (IXT), which was up 32%, and the S&P Energy Select Sector Index[...]

  • Nov 7, 2017, 8:42 AM

    Was Apple's Rise Painfully Obvious? For Some Yes, Other No

    Was Apple's Rise Painfully Obvious?  For Some Yes, Other No

    With Apple's stunningly strong earnings report, higher guidance and off the charts opening sales for the new X phone in place, the company rose smartly last week, peaking at a valuation never seen or heard before - 900 billion dollars!  Just under 10% more and this will be the first company ever valued at over 1 trillion dollars.  It has been a great ride for Apple, its shareholders and employees.  For 2017 the stock is up a whopping 50%.  To put that into perspective, at the[...]

  • VIX | Trader Talk | Nov 5, 2017, 1:18 PM

    Agenda Set for 3rd Annual Cboe RMC Asia - Dec 5 - 6

    Agenda Set for 3rd Annual Cboe RMC Asia - Dec 5 - 6

    Every job has the things you ‘have to do’ and those that you ‘get to do’.  I know I have worn this line out, but I cannot think of a better way to describe what the Cboe Risk Management Conferences mean to me.  The schedule for this year’s Asian version of RMC was posted on Friday and as always the lineup is very strong with respect to both the quality of speakers as well as the topics that will be covered in Hong Kong on December 5th and 6th.  Day[...]

  • VIX | Trader Talk | Trade Ideas | Nov 4, 2017, 11:23 AM

    Weekend Review of Volatility Indexes and ETPs - 10/30/2017 - 11/3/2017

    Weekend Review of Volatility Indexes and ETPs - 10/30/2017 - 11/3/2017

    VIX closed on an all-time low Friday and VXST was lower on the week as well, but note the right side of the VXST – VIX – VIX3M – VXMT curve where we had a slight rise in both the longer dated S&P 500 related volatility indexes.  The long ETPs were looking good on Monday, but they managed to give it back and more by the end of the week.  Even SKEW and VVIX, which have been holding up relative to VIX most of 2017 are starting to work lower.  Across the spectrum[...]

  • VIX | Trader Talk | Trade Ideas | Nov 4, 2017, 11:16 AM

    Weekend Review of Russell 2000 Options and Volatility - 10/30/2017 - 11/3/2017

    Weekend Review of Russell 2000 Options and Volatility - 10/30/2017 - 11/3/2017

    The Russell 2000 (RUT) had a tough week, losing almost 1% while the large cap focused Russell 1000 (RUI) managed to rise by 0.26%.  The outperformance of large versus small caps was threatened toward the end of the third quarter, but RUI is up 2.65% versus only a 0.27% rise for RUT in the fourth quarter. Due to very low VIX and a rise in the CBOE Russell 2000 Volatility Index (RVX) last week, the RVX / VIX relationship finished the week with RVX at over a 60% premium to VIX.  This happened[...]

  • VIX | Trader Talk | Trade Ideas | Nov 4, 2017, 11:10 AM

    Weekend Review of VIX Futures and Options - 10/30/2017 - 11/3/2017

    Weekend Review of VIX Futures and Options - 10/30/2017 - 11/3/2017

    VIX finished the week on an all-time closing low level.  However, despite the dramatic drop last week, only the November VIX future was lower while the rest of the contracts were higher for the week.  It may be that traders are expecting the low volatility environment to be coming to an end.    On Wednesday, a trader took a stance that VIX is going to remain at low levels, but higher than the recently very low readings.  With VIX around 9.90 and the November future trading[...]