• VIX | Trader Talk | Trade Ideas | Mar 11, 2018, 11:44 AM

    Weekend Review of VIX Options and Futures March 9th 2018

    Weekend Review of VIX Options and Futures March 9th 2018

    The 25% drop in VIX last week may seem extreme, but it isn’t even in the top 10 of weekly losses for VIX (it is 11th).  The all-time record was the last week in June 2016 with a 42% week over week loss.  Note the big drop in futures along with a return to contango.    And now a whale update.  Before getting into this trade here’s a little background. The first part of the story begins on Friday July 21st when a trade was initiated that sold 1 VIX Oct 12 Put for[...]

  • VIX | Trader Talk | Trade Ideas | Mar 11, 2018, 10:33 AM

    Weekend Review Russell 2000 Options and Volatility March 9th 2018

    Weekend Review Russell 2000 Options and Volatility March 9th 2018

    Stocks had a great week last week with the Russell 2000 (RUT) gaining over 4% and Russell 1000 (RUI) rising about 3.5%.  For the year RUT is up 4.01% while RUI is up 4.16%.  As you can see below small caps took the 2018 performance lead for a day last week.  The magnitude of the gain of over 4% for RUT this week is becoming commonplace.  Four of the nine weekly moves for RUT in 2018 have been outside of +/- 3% while there were no moves greater than +/-3% in 2017.  Welcome[...]

  • Cboe RMC | Mar 8, 2018, 6:32 PM

    Behavioral Finance Discussion at Cboe RMC

    Behavioral Finance Discussion at Cboe RMC

    Stacey Gilbert from Susquehanna and Ilya Feygin from WallachBeth Capital teamed up to talk about Behavioral Finance at Cboe RMC today in Bonita Springs, FL.  Stacey started out with an experiment discussing certain and probable wins and losses.  The point was to show that the expected rationality of decisions breaks down in certain situations.  She then mentions Prospect Theory which is basically the study of how people made decisions.  Specifically, she talked about loss aversion. [...]

  • Cboe RMC | Mar 8, 2018, 11:55 AM

    Louis Gave discusses China, the Dollar, and Recent Market Action at Cboe RMC

    Louis Gave discusses China, the Dollar, and Recent Market Action at Cboe RMC

    Louis-Vincent Gave from Gavekal in Hong Kong delivered a speech called Market Movers:  The Structure and the Cycle in 2018.  He starts out saying he’s often been depicted as a China perma-bull.  He notes that when considering an investment, you need to look into people’s incentives.  In China the recent party congress dictated that the focus is shifting from economic growth to being more aware of healthcare, housing, and the environmental impact of decisions. [...]

  • Cboe RMC | Mar 8, 2018, 9:51 AM

    Highlights from Fireside Chat with Cameron and Tyler Winklevoss at RMC

    Highlights from Fireside Chat with Cameron and Tyler Winklevoss at RMC

    Paul Stephens from Cboe conducted a fireside chat with Cameron and Tyler Winklevoss covering their insights into Bitcoin and Bitcoin XBT futures that were listed at the Cboe Futures Exchange in December 2017.   They started out discussing Bitcoin and blockchain technology.  They often refer to Bitcoin as Gold 2.0 and noted that the CFTC has declared bitcoin as a commodity.  Some background was given with respect to the creation of the Gemini Trust, it was noted that it took[...]

  • VIX | Cboe RMC | Mar 8, 2018, 8:23 AM

    Cboe Chairman and CEO Ed Tilly Kicks Off Day Two of Cboe RMC, Provides Thoughts on VIX, Volatility and Risk Management

    Cboe Chairman and CEO Ed Tilly Kicks Off Day Two of Cboe RMC, Provides Thoughts on VIX, Volatility and Risk Management

    Day two of Cboe RMC U.S. 2018 kicked off with Ed Tilly, Chairman and Chief Executive Officer of Cboe Global Markets, welcoming approximately 300 attendees to this year’s event, the 34th annual Cboe Risk Management Conference. Given the recent return of volatility to the marketplace, Tilly focused his remarks on volatility, Cboe’s VIX Index and risk management.  February 5 was an extreme day in the market.  The Dow and VIX Index experienced record single-day moves.  Exchange[...]

  • Cboe RMC | Mar 7, 2018, 3:02 PM

    Interpreting Volatility-Related Indicators and Determining Courses of Action at Cboe RMC

    Interpreting Volatility-Related Indicators and Determining Courses of Action at Cboe RMC

    Bill Speth from Cboe Global Markets teamed up with Mandy Xu, Chief Equity Derivatives Strategist Credit Suisse, for a session titled Interpreting Volatility-Related Indicators, and Determining Courses of Action.    Bill started out noting that the recent market activity has shown that many people understand volatility, but just as many do not understand volatility.  Cboe is taking on the task of raising the bar to try to educate more market participants on volatility and VIX. [...]

  • Cboe RMC | Mar 7, 2018, 7:23 AM

    New Report Shows Growth Over 17 Years in Number of Funds Using Options

    New Report Shows Growth Over 17 Years in Number of Funds Using Options

    A newly released report found that the number of SEC regulated funds using options rose from 10 in 2000 to 157 in 2017, and that the aggregate amount of assets in the options-based funds has risen to more than $54 billion. The new study, “Performance Analysis of Option-Based Equity Mutual Funds, CEFs and ETFs: An Update” is now available at www.cboe.com/funds  The new white paper updates the original findings of 2014 study of SEC-registered option-based funds, which focus on broad-based[...]

  • Mar 5, 2018, 7:05 PM

    PUTR PutWrite Index Generated Strong Risk-Adjusted Returns & Less Severe Drawdowns

    PUTR PutWrite Index Generated Strong Risk-Adjusted Returns & Less Severe Drawdowns

    This year we received new questions regarding the performance and downside risk of cash-secured put-writing strategies, and WisdomTree launched an ETF designed to track the Cboe Russell 2000 PutWrite Index (PUTR). In particular, questions have been raised as to what types of returns and drawdowns have been experienced by cash-secured putwrites over the past decade and in February 2018. HIGHER RETURNS SINCE 2001 AND IN FEBRUARY 2018 The line chart below shows that the PUTR had higher returns than[...]

  • Bitcoin | Mar 4, 2018, 10:40 AM

    Checking in on the Bitcoin Commitment of Traders Report

    Checking in on the Bitcoin Commitment of Traders Report

    The Cboe Futures Exchange was the first exchange in the world to list bitcoin futures.  One of the great things about a new market is the data that comes along with it, at least for quant geeks like me.   The CFTC collects information about trader’s positions in a wide variety of markets.  This report is titled the Commitment of Traders Report (COT Report).  The COT reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders[...]

  • VIX | Trader Talk | Trade Ideas | Mar 3, 2018, 2:52 PM

    Weekend Review of Russell 2000 Options and Volatility - March 3, 2018

    Weekend Review of Russell 2000 Options and Volatility - March 3, 2018

    Small cap stocks are playing catch up by not losing as much as large caps.  Last week the Russell 2000 (RUT) was down about 1% while the large cap focused Russell 1000 (RUI) lost just under 2%.  RUI’s lead has narrowed to 0.75%.  Since RUT stocks are more domestic in nature, I’m going to go out on a limb and say the trade war rumblings put more pressure on RUI that RUT last week. We have experienced an unprecedented run in the relationship between the Cboe Russell 2000[...]

  • VIX | Trader Talk | Trade Ideas | Mar 3, 2018, 12:34 PM

    Weekend Review of VIX Futures and Options - March 3, 2018

    Weekend Review of VIX Futures and Options - March 3, 2018

    The S&P 500 was down just over 2% last week and VIX does what it does (rose) when the S&P 500 is under pressure.  VIX was up over 18% and to a lesser extend the futures markets followed higher.  Worth noting above is the settlement price for March futures on Friday at 19.025.  This contract does not expire until the 21st, so there’s plenty of time for VIX to come back down a bit.  Usually when VIX moves up like it did and there’s this much time left to expiration[...]

  • Feb 28, 2018, 9:56 AM

    Average Daily Volume during Cboe’s Global Trading Hours (GTH) Tops 90,000

    Average Daily Volume during Cboe’s Global Trading Hours (GTH) Tops 90,000

    Over the years we have heard great interest from many investors in the ability to use SPX and VIX products around-the-clock to help manage their portfolios. The interest has been particularly strong from investors from outside the U.S. time zones. The trading hours for some key Cboe products (SPX options, VIX options, VIX futures, and XBT futures) now include both Regular Trading Hours (from 8:30 a.m. to 3:15 p.m. CT), and Global Trading Hours (GTH) as shown in the table below the three volume charts.[...]

  • Feb 26, 2018, 11:19 AM

    A Rational Perspective on The Fed and Interest Rates

    A Rational Perspective on The Fed and Interest Rates

    The equity markets continue to respond to higher rates on the long end of the curve, but thankfully the Fed sees the entire curve is shifting upward.  This would be considered a positive, as opposed to an inverted curve.  So, with rates at levels not seen in a couple of years, but for a good reason (a bit of inflation finally coming into the system) why is everyone freaking out?  The obsession with higher rates is just mind-boggling, but perhaps we can answer some questions about it[...]

  • Trader Talk | Trade Ideas | Feb 24, 2018, 4:29 PM

    The Warren Buffett Short Put Trade - Year End 2017 Update

    The Warren Buffett Short Put Trade - Year End 2017 Update

    A few years ago, I was asked to co-author the study guide that accompanies the 3rd version of The Warren Buffett Way.  While doing research for this project I came across a discussion of a handful of index put options that Berkshire Hathaway had sold between 2004 and 2008.  Every year when the Berkshire Hathaway annual report comes out, I dig in to see how these trades are doing.  Here’s the update as of the end of 2017. Back in 2008, as the financial world was falling[...]

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