• VIX | Jul 7, 2016, 2:54 PM

    VIX Roll-Over: Sigma Channels, Sentiment Readings & Order Flow Color

    VIX Roll-Over: Sigma Channels, Sentiment Readings & Order Flow Color

    Chart 1: VIX Sigma Channels Chart Worth noting is that VIX hit +3 sigma on Thursday before last in post-Brexit trading, creating the second spike in volatility for CY 2016.  While June lows of SPX are expected to be tested, the timing ideally should be a bit further out in late July, with spot VIX targeting 24 to 27 range, as this retest in volatility comes in about 4-5 weeks apart. Chart2: VIX Futures 3-mo. Spread Indicator     This 3-mo spread is favorite of[...]

  • Market News | Trader Talk | Trade Ideas | Jul 6, 2016, 2:02 PM

    Three Trades for #NationalFriedChickenDay

    Three Trades for #NationalFriedChickenDay

    Nothing gets the instructors at the Options Institute more excited than national holidays. Today’s event is National Fried Chicken Day which has us collectively getting together to determine how investors and traders can use the option market to trade America’s second favorite fried food. Peter Lusk suggested we take a look at Yum Brands (YUM) which owns his favorite fast food outlet Kentucky Fried Chicken or just KFC for the kids. Peter is often seen on the weekend heading home on his[...]

  • Cboe Benchmark Indexes | Jul 6, 2016, 12:05 PM

    In Today’s Market with Lower Yields on “Traditional” Investments -- Explore CBOE Benchmark Indexes

    In Today’s Market with Lower Yields on “Traditional” Investments -- Explore CBOE Benchmark Indexes

    A recent piece in the Wall Street Journal noted that – “The yield on the benchmark 10-year U.S. Treasury note fell to its lowest level ever Tuesday, a new milestone in a three-decade downward run that even veteran traders never thought would go so far or last so long. The yield closed below 1.4% for the first time … according to data going back to 1977. The question now is how low can they go. Investors buying Treasurys now are taking big risks, as prices of longer-term debt can[...]

  • VIX | Trader Talk | Trade Ideas | Jul 5, 2016, 4:49 PM

    Profiting from the Side Dishes

    Profiting from the Side Dishes

    If it sounded like I had a little trick up my sleeve upon hastily closing my last post with a promise of quick and interesting updates, here's a confession:  Yes, one typing hand closed the post while the other was closing my TVIX short (see detail below). Crown jewel of June 21st, an otherwise lackluster day Everyone who lived through it will agree that nothing in particular happened on June 21st, but somehow I got a little shaken up inside and decided it was a good idea to close[...]

  • Market News | Trade Ideas | Jul 5, 2016, 11:59 AM

    Earnings Week of 7/5/2016 - 7/8/2016

    Earnings Week of 7/5/2016 - 7/8/2016

    This is the last of the lull weeks with only two companies reporting earnings that have short dated options available for trading.  As always the data below is based on the last three years of earnings results.  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 5, 2016, 11:31 AM

    Managing Downside Exposure with PPUT Index - Blog #3 on 30-Year Price History

    Managing Downside Exposure with PPUT Index - Blog #3 on 30-Year Price History

    [This is the third in a series of nine blogs to be published in early July at the CBOE Options Hub on nine CBOE benchmark indexes which have price histories that begin on June 30, 1986, more than three decades ago.] When a novice investor asks me to describe an options strategy, I often use an insurance analogy – millions of people buy insurance policies and pay premiums to insure their autos and homes against disasters, and equity options investors pay premiums to mitigate downside equity[...]

  • Technical Analysis & Charts | VIX | Futures | Strategy | Jul 5, 2016, 9:40 AM

    BigTrends.com Weekly Market Outlook - Will The Post-Brexit Rally Continue?

    BigTrends.com Weekly Market Outlook - Will The Post-Brexit Rally Continue?

    Despite the horrific start on Monday, the bulls were decidedly in charge over the course of the last four days of last week, setting up a weekly gain of 5.1% for the S&P 500 (SPX) (SPY). The index is almost back to where it was before the Brexit vote shocked the world... for better or worse. To that end, it's interesting (though not entirely surprising) that the rally started to slow on Friday. Perhaps it was just a small wave of profit-taking in front of a long weekend. Or, perhaps the market[...]

  • VIX | Education | Jul 5, 2016, 9:13 AM

    Gaps and Volatility: Will it Be a 'V' or a 'W'?

    Gaps and Volatility: Will it Be a 'V' or a 'W'?

    Since the middle of June we have seen some remarkable market action. What started out with a rather shallow dip morphed into a near-catastrophic drop following the Brexit decision toward the end of the month, leaving many to wonder if they should have followed the 'sell in May and go Away' advice from the prior month. Volatility started to kick up mid-month as the Brexit vote came closer, in fact European markets reacted far more negatively leading up to the vote with the VSTOXX term structure showing[...]

  • Market News | Jul 4, 2016, 6:58 AM

    Weekend Review - Volatility Indexes and ETPs - 6/24 - 7/1

    Weekend Review - Volatility Indexes and ETPs - 6/24 - 7/1

    In hindsight volatility definitely overshot to the upside in response to Brexit and the price action on Monday where VIX and the S&P 500 both moved lower together was a sign of things to come last week. The 42.66% drop in VIX was the biggest week over week drop on record (going back to 1990). The whole VXST – VIX – VXV – VXMT underwent a shift from one extreme to the other last week. SKEW put in an all-time high and then backed off to more normal levels. TYVIX also[...]

  • Market News | VIX | Trader Talk | Futures | Strategy | Trade Ideas | Jul 3, 2016, 9:20 AM

    Weekend Review - VIX Futures and Options - 6/27 - 7/1

    Weekend Review - VIX Futures and Options - 6/27 - 7/1

    The curve below is what happens when you have the biggest week over week drop for VIX on record. The 42% loss in VIX shattered the previous largest drop of 36.53% which occurred in the last week of 2012. Not so coincidentally both were weeks before a three-day weekend. Late Monday, with the July VIX Futures at 23.70 and spot VIX at 23.85 someone came in taking a long position in the VIX Jul 20th 22 Puts paying 2.75. The payoff at July settlement appears below, but by the end of the week[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Jul 2, 2016, 7:42 PM

    Weekend Review - Russell 2000 Options and Volatility - 6/27 - 7/1

    Weekend Review - Russell 2000 Options and Volatility - 6/27 - 7/1

    Small cap stocks, in the form of the Russell 2000 Index (RUT) were up 2.51% last week, which was a nice rebound from the previous week’s reaction to Brexit vote. However, large cap stocks rebounded by a wider margin with the Russell 1000 (RUI) gaining 3.10%. Both benchmark indexes are higher for 2016 but RUI is had a 1.01% lead on RUT (2.85% vs. 1.84%). VIX experienced the biggest weekly drop on record losing just over 42%. The chart below is just as dramatic, but in the other[...]

  • Market News | Strategy | Cboe Benchmark Indexes | Jul 1, 2016, 3:02 PM

    Less Left-Tail Risk for BFLY Index - Blog #2 on 30-Year Price History

    Less Left-Tail Risk for BFLY Index - Blog #2 on 30-Year Price History

    This is the second in a series of nine blogs to be published in early July at the CBOE Options Hub on nine CBOE benchmark indexes which have price histories that begin on June 30, 1986, three decades ago.] Over the past three decades the CBOE S&P 500 Iron Butterfly Index (BFLY) demonstrated the ability to help manage drawdowns and left tail risk. The BFLY Index is designed to track the performance of a hypothetical option trading strategy that 1) sells a rolling monthly at-the-money (ATM) S&P[...]

  • Market News | Cboe Benchmark Indexes | Jul 1, 2016, 12:58 PM

    Strong Risk-Adjusted Returns for PUT Index – Blog #1 on 30-Year Price History

    Strong Risk-Adjusted Returns for PUT Index – Blog #1 on 30-Year Price History

    [This is the first in a series of nine blogs to be published in early July at the CBOE Options Hub on nine CBOE benchmark indexes which have price histories that begin on June 30, 1986, three decades ago.] The CBOE S&P 500 PutWrite Index (PUT) – is an award-winning benchmark index for a strategy that has grown in popularity over the past decade; arguably is the world’s best-known and leading gauge of the cash-secured put-writing strategy; has facilitated increased use of cash-secured[...]

  • Market News | VIX | Trader Talk | Futures | Strategy | Jun 30, 2016, 6:04 PM

    First Half of 2016 Confirms a Higher Volatility Regime

    First Half of 2016 Confirms a Higher Volatility Regime

    We are already half way done with 2016 and it appears what we thought going into the year is being confirmed by SPX implied volatility. If the Fall of 2015 there was lots of chatter about the equity markets in the US shifting from a low to a high volatility regime. The low volatility regime had been in place for several years and the first signal of a change came back in late August 2015 when VIX topped 50 intraday for the first time since the great financial crisis. I have two favorite charts[...]

  • Education | Jun 30, 2016, 4:43 PM

    Mid-Year Update on Volatility Indexes, and Thirty Years of Price History for Benchmark Indexes

    Mid-Year Update on Volatility Indexes, and Thirty Years of Price History for Benchmark Indexes

    Here are mid-year updates on benchmark indexes and volatility indexes at CBOE – (1) Nine CBOE benchmark indexes all have had less volatility than key stock indexes over the last three decades; (2) The highest daily closing values for select volatility indexes so far this year were 28.14 on Feb. 11 for the VIX Index, and 125.13 on June 24 for the VVIX Index. The CBOE/CME FX British Pound Volatility Index (BPVIX) rose prior to the Brexit referendum, and its daily closing values had a big range[...]