• Education | Jul 18, 2016, 4:32 PM

    Hunter S. Thompson Would Suggest Focus in Your Trading

    Hunter S. Thompson Would Suggest Focus in Your Trading

    If he were alive today Hunter S. Thompson would be one year short of becoming an octogenarian and celebrating his 79th birthday.  Anyone who has seen Johnny Depp’s depiction of the ‘gonzo journalist’ in the 1998 movie Fear and Loathing in Las Vegas knows that would be nothing short of a miracle.  What initially made Thompson famous was the book Hell’s Angels:  The Strange and Terrible Saga of the Outlaw Motorcycle Gangs which was published in 1966.  When[...]

  • Technical Analysis & Charts | VIX | Education | Jul 18, 2016, 10:53 AM

    Weekly Market Outlook - A Breakout Amid High Valuations

    Weekly Market Outlook - A Breakout Amid High Valuations

    The market (the S&P 500 anyway) rekindled the rally early last week, finally pushing through the resistance of its May 2015 peak at 2135 to move to a high of 2169. But, it didn't end the week with the same zeal it started it with. In fact, on Friday the index lost a little ground, and logged the first lower low in almost two weeks. A sign that the weight of the 8% gain over the past three weeks and the 16% gain since February has become too much? Possibly. Yet, that doesn't inherently mean[...]

  • VIX | Trader Talk | Trade Ideas | Jul 17, 2016, 12:00 PM

    Weekend Review - VIX Options and Futures - 7/11 - 7/15

    Weekend Review - VIX Options and Futures - 7/11 - 7/15

    With VIX testing 2016 lows this past week the soon to be retired July future headed lower at a slightly faster rate than VIX dropping 6.43% versus 4.02%.  Even with the bigger loss on the week the July contract finished the week at more than a one premium to VIX.  We will see on Wednesday morning if the futures or the spot index win the tug of war into July settlement.  I would be remiss if I didn’t point out the steepness of the VIX curve from August to December.  VIX is[...]

  • Market News | Jul 17, 2016, 8:00 AM

    Weekend Review - Russell 2000 Index and Options - 7/11 - 7/15

    Weekend Review - Russell 2000 Index and Options - 7/11 - 7/15

    It was quite a week for small cap stocks as the Russell 2000 (RUT) rose 2.4% while the Russell 1000 (RUI) gained 1.5%.  This strong week for RUT places the index up 6.11% for 2016, a tad more than RUI’s 2016 gain of 5.71%.   Even more impressive for RUT, the small cap index is up 26.4% since putting in a closing low of 953.72 back in February. In the volatility space both VIX and the CBOE Russell 2000 Volatility Index were lower last week.  The RVX / VIX premium[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Jul 16, 2016, 12:00 PM

    Weekend Review - Volatility Indexes and ETPs - 7/11 - 7/15

    Weekend Review - Volatility Indexes and ETPs - 7/11 - 7/15

    Short term volatility was the big loser among the four S&P 500 related volatility indexes as VXST lost over 10% last week.  This was more than two times the drop in VIX and more than three times the drop in VXV and VXMT.  The result is a pretty darn steep curve indicating concerns about the second half of this year for the stock market are lurking around in option volatility. Despite the drop in VIX the VIX of VIX rose last week.  As I typed that I realized that two[...]

  • VIX | Trader Talk | Trade Ideas | Jul 16, 2016, 7:36 AM

    Baseball, hot dogs, apple pie, and...VIX shortcake

    Baseball, hot dogs, apple pie, and...VIX shortcake

    If you can't wear shorts in the summer, when can you?  At the time of my last writing, I was showing off a pair:  TVIX and UVXY, which everyone knows are really just two legs of the same thing (for my purposes, anyway).  Even though I had donned one leg before the other (I put my pants on one leg at a time, just like everyone else), I took them both off in one motion, as such: But only one day later, my thoughts were consumed in the following manner: From WikiHow's "How[...]

  • Market News | Jul 15, 2016, 3:13 PM

    The Weekly Options News Roundup – 7/15/2016

    The Weekly Options News Roundup – 7/15/2016

    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. More Than Just A Manic Monday A new tool has emerged in CBOE’s suite of Weeklys offerings with the planned addition of Monday Weeklys on August 15th. Monday Weeklys allow investors to hedge over-the-weekend risks in addition to targeting event-driven hedging.  The new Weeklys contract shares the same characteristics[...]

  • Market News | Trader Talk | Trade Ideas | Jul 14, 2016, 1:34 PM

    Earnings Next Week - 7/18 - 7/22

    Earnings Next Week - 7/18 - 7/22

    Finally!  The second quarter earnings season kicks into high gear next week.  As always the data below is based on the last three years of earnings results unless the ticker is in itallics.  The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings.

  • Cboe Benchmark Indexes | Jul 13, 2016, 9:42 AM

    CLL Index and the Collaring of Stock Portfolio Risk - Blog #9 on 30-Year Price History

    CLL Index and the Collaring of Stock Portfolio Risk - Blog #9 on 30-Year Price History

    The CBOE S&P500 95-100 Collar Index (CLL) invests in short S&P 500® (SPX) calls, long SPX puts and long stocks in order to gather premium income and manage downside risk.  The histogram with the S&P 500 and CLL indexes shows that the S&P 500 had 13 months with declines of worse than 8 percent, while the CLL Index had only 1 such month. Certain index options strategies can be used to help manage left tail risk. The SPX puts at 95 moneyness did help mitigate the downside[...]

  • VIX | Trader Talk | Trade Ideas | Jul 13, 2016, 12:13 AM

    When VIX and SPX Rise Together - the 2016 Version

    When VIX and SPX Rise Together - the 2016 Version

    On July 11 and July 12 both the S&P 500 and VIX rose on the day.  This brought out an old blog I wrote in 2013 discussing what the stock market has historically done when both the S&P 500 and VIX rise two days in a row.  I updated the numbers from that last study and now we have 92 occurrences where both indexes rose two days in a row (today was number 93 and the jury is still out on the subsequent market action.  The table below summarizes what the S&P 500 did on average[...]

  • Cboe Benchmark Indexes | Jul 12, 2016, 4:31 PM

    CNDR Index and Portfolio Management - Blog #8 on 30-Year Price History

    CNDR Index and Portfolio Management - Blog #8 on 30-Year Price History

    CBOE S&P 500 Iron Condor (CNDR) has a data history of more than 30 years, and it engages in call and put options positions in order to gather premium income and manage downside risk. The histogram with the S&P 500 and CNDR indexes shows that the S&P 500 had 26 months with declines of worse than six percent, while the CNDR Index had 10 such months. Certain index options strategies can be used to help manage left tail risk. The CNDR Index tracks the performance of a hypothetical option[...]

  • Market News | Education | Trade Ideas | Jul 12, 2016, 10:31 AM

    New SPX Monday-Expiring Weeklys Options To Launch Next Month

    New SPX Monday-Expiring Weeklys Options To Launch Next Month

    CBOE recently announced that it plans to list S&P 500® Index (SPX) Monday-expiring Weeklys options, beginning August 15, pending regulatory approval.  With the expected introduction of SPX "Monday Weeklys," CBOE will offer SPX options with Monday, Wednesday and Friday expirations. SPX Weeklys are one of CBOE's fastest-growing products, with volume in 2015 setting a 10th consecutive annual record. The chart below shows that SPX Wednesday-expiring weekly options set new volume[...]

  • Cboe Benchmark Indexes | Jul 11, 2016, 1:19 PM

    BXM Index – Leading Benchmark for Capturing the Volatility Risk Premium - Blog #7 on 30-Year Price History

    BXM Index – Leading Benchmark for Capturing the Volatility Risk Premium - Blog #7 on 30-Year Price History

    On April 29, 2016, Morningstar added a new Option Writing category to its U.S Retail Category system, and the Category Index is the CBOE S&P 500 BuyWrite Index (BXM). In the May 7, 2016, Striking Price column in Barron’s, Steve Sears wrote -- "...THE OPTIONS INDUSTRY has taken a major step onto Main Street. Morningstar, which millions of individuals rely upon to evaluate mutual funds, has created a category for options-trading funds. The significance of this can’t be overstated.[...]

  • Technical Analysis & Charts | VIX | Futures | Strategy | Jul 11, 2016, 10:30 AM

    Weekly Market Outlook - Valuation Concerns as New All-Time Highs Approach

    Weekly Market Outlook - Valuation Concerns as New All-Time Highs Approach

    Following through on the surprising post-Brexit bounce from two weeks ago, the S&P 500 (SPX) (SPY) gained 1.3% last week, closing at 2129.90. Though that wasn't the highest close ever for the index (nor did it reach a new intraday high), that was the highest weekly close ever for the S&P 500. And, we're within easy reach of the pinnacle of 2134.72 hit in May of last year. This is a do-or-die moment for the market. If it's to muster any more upside, it's going to have to plow into new-high[...]

  • Trader Talk | Jul 11, 2016, 9:09 AM

    Market Talk, Part 1: Words and Phrases to Avoid

    Market Talk, Part 1:  Words and Phrases to Avoid

    We hear so much definitive market talk from the financial media, and most of it is careless and quite useless. The best advice is to follow the market action and not the anecdotes and phrases that will put you in the wrong frame of mind. Discipline and hard work trump complacency and laziness, so turn off the noise and be at your best. ‘It will be different this time’ — Mark Twain reportedly said, 'History doesn’t always repeat, but it often rhymes'. Investor/trader emotions[...]