• Market News | Dec 18, 2016, 9:58 AM

    Weekend Review Volatility Indexes and ETPs 12/12 - 12/16

    I always lead off this blog with a chart showing the week over week change in the four volatility indexes based on S&P 500 Index (SPX) option pricing.  Just for the heck of it I took a look at what the VXST – VIX – VXV – VXMT curve did this time last year when we also experienced a rate hike.  On the left below is last year’s price change and on the right is what happened last week.  It is like night and day, in fact based on week over week changes in implied[...]

  • VIX | Trader Talk | Futures | Trade Ideas | Election & VIX | 2016 Recap | Dec 17, 2016, 2:53 PM

    Weekend Review VIX Options and Futures 12/12 - 12/16

    VIX was up slightly last week despite the markets having a relatively muted response to the first rate hike from the FOMC in just under a year.  The December VIX futures which expire this coming Wednesday actually dropped a bit as they had been slightly elevated relative to spot VIX.  One would never think the markets digested a rate hike last week by looking at the volatility market price action below. Wednesday last week there was a trader who decided volatility is going[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Dec 17, 2016, 1:54 PM

    Weekend Review Russell 2000 Options and Volatility 12/12 - 12/16

    Small caps finally came under pressure last week with the Russell 2000 (RUT) down about 2% while the large cap focused Russell 1000 (RUI) finished basically flat on the week.  For the year RUT is still dominating up just over 20% while RUI is up a respectable 10.6% for 2016. The relative levels between the CBOE Russell 2000 Volatility Index (RVX) and VIX narrowed as RVX dropped last week and VIX rose.  Relative to most of 2016 the premium is still a bit high. Friday this past[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Dec 16, 2016, 4:04 PM

    Panel on The Growing Role of Predictive Analytics in Investing

    I had the pleasure of moderating a one-hour panel discussion for more than 60 attendees at CBOE on December 16 featuring these three experts: •        Joe Gits, CFA, CEO and Co-Founder - Social Market Analytics (SMA) •        Professor Koleman Strumpf, Professor of Business Economics - University of Kansas School of Business •        Dr. Wachi Bandara, Chief Research Officer – Pluribus Labs The panel[...]

  • Exploring the Rare Action in the S&P 500 Put / Call Ratio

    Yesterday, astute market observer and Options Institute Instructor Kevin Davitt pointed out that the SPX Put Call Ratio had closed under 1.00 three days this month (Dec 7th, Dec 8th, and Dec 13th).  I knew this was a rarity, but didn’t realized how rare it was for this ratio to close below 1.00.  In fact, it has only happened sixteen times since July 2010 (which is how far back the data goes back on CBOE’s website).  Five of those sixteen occurrences happened in 2016 –[...]

  • Market News | Trader Talk | Dec 12, 2016, 9:56 AM

    Is The Fed Still Relevant? Markets Say YES!

    While it may seem stocks have been surging higher since the election a month ago, some areas of the market have stalled out and have retreated.  The Fed will meet this week, and with markets at all time highs and broad sector rallies around each turn it appears there is not a weak spot to be found.  Many bears have started to capitulate, and while this is more a process than an event we must continue to be aware of the bogey that could halt this tremendous rally.  None other than the[...]

  • VIX | Trader Talk | Trade Ideas | Dec 11, 2016, 2:18 PM

    The Weekly Options News Roundup – 12/11/2016

    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. VIX FIX: The Volatility If Game    Over the past weeks, there has been myriad of “if” scenarios cited that could potentially trigger long-term volatility to re-emerge.  To-date, macro events including the Brexit vote, a surprise Trump victory in the U.S. presidential election and a consensus[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Dec 11, 2016, 9:03 AM

    Weekend Review - Volatility Indexes and ETPs - 12/5 - 12/9

    With the continuation of the election related equity market rally comes even lower SPX option implied volatility.  The curve shifted lower across the board, but do note the angle steepens a bit between VIX and VXV with VXV representing IV into 2017. The performance table lives up to expectations after a week where the S&P 500 rose 3%.  A couple of things that are worth note.  VVIX remains at relatively high levels despite VIX being under pressure.  SKEW finished the week[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Election & VIX | 2016 Recap | Dec 10, 2016, 1:56 PM

    Weekend Review - VIX Options and Futures - 12/5 - 12/9

    VIX is experiencing some seasonal pressure despite the looming FOMC meeting (and expected rate hike) this Wednesday.  VIX finished the week with an 11 handle at 11.75.  Without the final known unknown market event of 2016 coming up next week one can only wonder where VIX would be.  The curve is steep, but that rise doesn’t really kick in until next year when the uncertainty of political change in Washington DC is probably hovering over the equity markets. Things[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Dec 10, 2016, 9:36 AM

    Weekend Review - Russell 2000 Options and Volatility - 12/5 - 12/9

    The out performance of small cap stocks in the form of the Russell 2000 (RUT) relative to large cap stocks which is best represented with the Russell 1000 (RUI) has been nothing short of astonishing.  Last week RUT was up over 6% while RUI gained just over 3%.  For the year, RUT is up over 22% and RUI is up almost 11%. Breaking down the performance difference a little more starts with a look at relative performance since election day.  RUT is up 16.1% and RUI is up 5.9%. [...]

  • Market News | Trader Talk | Strategy | Trade Ideas | Dec 8, 2016, 1:11 PM

    Block Trade Analysis - Buyer of 250,000 XLF Jan 20th 25 Calls

    All of equity market sectors the financial sector seems to have benefited the most since Donald Trump was elected President back on November 8th.  Note on the price chart below that as of mid-day today the Financial Select Sector SPDR Fund (XLF) is up about 19% since election day. Apparently one trader expects this bull run for XLF to continue into the new year.  This morning, less than 90 minutes into the trading day, there was a buyer of 250,000 XLF Jan 20th 25 Calls for 0.13. [...]

  • Market News | Trader Talk | Trade Ideas | Dec 6, 2016, 7:48 AM

    Block Trade Analysis - TOL Earnings Trade

    As I write this Toll Brothers (TOL) is trading up 0.73 to 31.20.  The company reported earnings this morning.  I scrambled to find a trade that called the direction of this earnings reaction from yesterday and didn’t have to look to hard.  With just under half an hour to the close and TOL trading at 30.47 someone came in and sold several hundred TOL Dec 9th 29.50 Puts for 0.50 and purchased the TOL Dec 9th 27.00 Puts for 0.15 netting a credit of 0.35 per spread.  The payoff[...]

  • VIX | Trader Talk | Trade Ideas | Dec 5, 2016, 3:42 PM

    Block Trade Analysis - Long Dec VIX Put

    Buying a single option is not the most exotic trade, but it can be interesting, especially when it involves buying a VIX option.  This morning, with VIX at 12.75 and the December VIX futures trading at 13.95 there was a buyer of 12,000 VIX Dec 21st 14.00 Puts for 1.10.  A payout at expiration on the morning of the 21st appears below.  Note the VIX futures and spot VIX levels when the trade was executed are highlighted on the diagram. Both the futures and spot index finished the day[...]

  • VIX | Trader Talk | Trade Ideas | Dec 5, 2016, 12:17 PM

    Whistling Over the Bridge

    At my last writing I had taken an accounting-sheet loss by simply exchanging one security for a comparable one and then selling some options against that position with the intention of bringing in some extra return on that position.  Refresher: Converted to: (shown after just a few minutes as the position immediately resumed producing red ink): Well, what happened to those during the earthquake that was election night and the days leading up to it?  I said I'd report back on my bag of[...]

  • Market News | Strategy | Dec 5, 2016, 9:06 AM

    A Market Under Distribution Has No Mercy

    After a robust market rise on good turnover after the election, we find ourselves a month later wondering what is next.  Many thought a Trump victory was indeed the elixir needed to get the economy and markets moving, and that sentiment was pronounced immediately with a bullish market response.  Further, bonds were trashed, an amazing allocation shift that happened swiftly and with bold strokes. Markets tend to punish complacency when you least expect it.  As the volatility was sucked[...]