• Apr 20, 2017, 1:57 PM

    Rewrap and Return to the Store

    Rewrap and Return to the Store

    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,[...]

  • VIX | French Election | Apr 19, 2017, 4:55 PM

    A Case of Volatility Futures Leading an Index

    A Case of Volatility Futures Leading an Index

    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[...]

  • Apr 19, 2017, 7:58 AM

    Taking the Unmarked Trail

    Taking the Unmarked Trail

    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[...]

  • Apr 17, 2017, 11:55 AM

    Showdown: The Fed Vs. The Bond Market

    Showdown:  The Fed Vs. The Bond Market

    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 | Apr 17, 2017, 9:57 AM

    Earnings Week of 4/17 - 4/21

    Earnings Week of 4/17 - 4/21

    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.

  • What's Trading | Apr 13, 2017, 3:10 PM

    Candy Coated What's Trading Today from Kevin Davitt

    Candy Coated What's Trading Today from Kevin Davitt

    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[...]

  • What's Trading | Apr 12, 2017, 5:14 PM

    What's Trading Today - Roma on a WFC Straddle

    What's Trading Today - Roma on a WFC Straddle

    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.

  • VIX | French Election | Apr 11, 2017, 7:43 PM

    How I Know the US Market is Waking Up to the French Election

    How I Know the US Market is Waking Up to the French Election

    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[...]

  • What's Trading | Apr 11, 2017, 2:03 PM

    What's Trading Today - Buyer of Puts on TWTR

    What's Trading Today - Buyer of Puts on TWTR

    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.

  • What's Trading | Apr 10, 2017, 1:18 PM

    What's Trading Today - SPX Broken Wing Butterfly

    What's Trading Today - SPX Broken Wing Butterfly

    Today’s What’s Trading episode was a discussion of a SPX Broken Wing Iron Butterfly expiring this coming Thursday April 13th.  Link to the video is below and after that some additional commentary about today's trade. Click Here for Today's Video The payoff diagram below shows the outcome if this trade is held through Thursday’s close.  Between 2345.60 and 2374.40 this trade makes a profit.  The payoff diagram below also highlights that the risk of loss is bigger[...]

  • Apr 10, 2017, 11:44 AM

    Can Trump Really Take Credit For This Recent Rally?

    Can Trump Really Take Credit For This Recent Rally?

    We all are aware of the stock market at/near all time highs, a stunning run post-election.  President Donald Trump has taken some (most?) of the credit for a surge in stock prices, but is it all due to his election?  We can certainly say sentiment has improved since the election results were rendered, but there were other things happening that also deserve credit for that strong move upward in the stock market.  We should start by stating the obvious - a potential for strong fiscal[...]

  • Apr 9, 2017, 1:52 PM

    The Weekly Options News Roundup – 4/9/2017

    The Weekly Options News Roundup – 4/9/2017

    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.       CBOE Hosts Chicago’s CAIA Chapter On Wednesday, Edward Szado of Providence College and Joe Gits of Social Market Analytics (SMA) delivered presentations at CBOE on the topic of Using Sentiment Analysis and the Volatility Risk Premium to Enhance Portfolio Returns A number subjects were[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Apr 9, 2017, 10:32 AM

    Weekend Review of Russell 2000 Options and Volatility - 4/3/2017 - 4/7/2017

    Weekend Review  of Russell 2000 Options and Volatility - 4/3/2017 - 4/7/2017

    An emerging theme in 2017 is that when stocks come under pressure the Russell 2000 (RUT) seems to take it on the chin a bit more than the Russell 1000 (RUI).  Last week the large cap focused RUI was lower by 0.33% while RUT lost just over 1.5%.  This widens the lead that RUI has on RUT to about 4.5% for 2017.  With small caps leading stocks lower the relative level of small cap volatility remains high compared to large cap volatility.  The best way to measure this is the CBOE[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Apr 9, 2017, 10:29 AM

    Weekend Review of Volatility Indexes and ETPs - 4/3/2017 - 4/7/2017

    Weekend Review of Volatility Indexes and ETPs - 4/3/2017 - 4/7/2017

    When there is not a whole lot going on to impact the financial markets we can get fixated on different topics.  Maybe that is what is going on with me and the French Election process.  The steep difference between VXST and VIX on the chart below may reflect the time frame being measured by VXST being just short of the pending rise in implied volatility that is expected in front of round one of the election in a couple of weeks.  It will be interesting to see if we get a relative rise[...]

  • VIX | Trader Talk | Trade Ideas | French Election | Apr 8, 2017, 1:05 PM

    Weekend Review of VIX Options and Futures - 4/3/2017 - 4/7/2017

    Weekend Review of VIX Options and Futures - 4/3/2017 - 4/7/2017

    The S&P 500 lost about 0.3% last week and VIX rose.  I think the VIX to S&P 500 relationship is only part of the story related to VIX rising last week.  It appears the pending election process in France is starting to influence US volatility.  Note that April is a bit higher than May volatility in the orange circle on the chart below.  This is a fairly rare occurrence for the futures considering the current low level of VIX.  As long as there is a cloud of uncertainty[...]