S&P 500 implied volatility was lower across all four time periods that are measured by CBOE Volatility Indexes last week. VXST finished the week at 9.19 which is actually a tad higher than the low for 2016. VIX also finished near the 2016 low of 11.27 but finished 0.05 above that level. As a Trump presidency looms over the markets, with all the rhetoric and fear of what this means for the world, it’s a bit amazing market volatility is so low.
The table below[...]
The year started out in a similar fashion to the way it ended in 2016 with the Russell 2000 (RUT) out-performing the Russell 1000 (RUI) after the first two trading days of 2017. However, the first week of the new year ended with RUI putting up some strong numbers and RUT even losing value on Friday while RUI was higher on the day.
I included the last six months of 2016 on the chart below to give some perspective on the relative premium of the CBOE Russell 2000 Volatility Index[...]
One more week until earnings season kicks in. In the mean time we have three major financials releasing numbers on Friday 13th. As always the data below is based on the last three years of earnings results unless the ticker is in italics. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings. Finally, double check the earnings dates as not all were confirmed.
Yesterday, January 4th, in order to start out the new year with some degree of nail-biting (figuratively) drama, I hatched a little plan involving some short shares of UVXY. The first thing I did was to buy to close 400 shares, reducing the 1,800 I had opened the previous day to 1,400 in quantity. My plan was to re-short those 400 shares later in the day or on some upcoming day, along with 200 more which I envisioned as a day trade.
Then, thinking about the 1,400 short shares I still[...]
Investors now have access to price histories for several CBOE benchmark indexes that date back 30.5 years. The first two charts below show that since mid-1986 both the CBOE S&P 500 30-Delta BuyWrite Index (BXMDSM) and CBOE S&P 500 PutWrite Index (PUTSM) had higher returns than the S&P 500® Index, 30-Year Treasury Bond Index (Citi), MSCI EAFE® Index, and S&P GSCI Index.
HIGHER RETURNS AND LOWER VOLATILITY
The Annualized Returns and Standard Deviations bar graphs below show[...]
A very small but mighty list with MON and WBA reporting Thursday before the open. As always the data below is based on the last three years of earnings results unless the ticker is in italics. The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings. Finally, double check the earnings dates as not all were confirmed.
As we embark on a new year, we can learn from the past to help us bolster our efforts into the future. Change is always good, but there are some things very tough to alter - our emotions. Try as we may to check our emotions at the door, as traders/investors there is often too much going on to just be emotionless. When money is on the line we suffer from the emotional responses of fear and greed. We are ALL wired this way and find ourselves somewhere on the spectrum - there[...]
CBOE offers more than 25 volatility indexes<http://www.cboe.com/micro/volatility/introduction.aspx> that can serve as valuable tools for investors who wish to gauge intra-day and long-term sentiment changes related to a variety of asset classes. In addition, investors take long and short positions in futures and options on key volatility indexes.
The tables and seven graphs below provide an overview of the 2016 performance of 18 of CBOE’s volatility indexes and the CBOE SKEW Index. Key[...]
Christmas certainly came early this year, but where would I look for more presents in the season of giving?
Consumers, not corporations run the economy. We collectively are responsible for 70% of our economy, so when we are more confident, when sentiment is positive, it is reflected in stock prices.
In 2017 I see several catalysts for higher consumer confidence: 1) Lower taxes 2) Redo or Replace Obamacare, both of which will put more change in consumer's pockets. Where will they spend that?
Shares of Kate Spade (KATE) made a mid-day headline grabbing move as news came out saying the company was considering putting itself up for sale. A couple of things happened before the news that have people talking. The first was in the option market where a few minutes before the stock rallied there were a few very well timed call option purchases. The time and sales below highlights some of the bigger trades from today.
Data Source: LiveVol Pro
The buy of just under 2,000 KATE[...]
If you have been following me for some time then you know I'm all about learning, self-improvement and advancement in trading. Eyes wide open, ears perked up. Those who choose to move forward and become better are those who see the opportunity to learn at every turn, be it an obstacle or a wall. We gain knowledge from each experience good or bad, we learn about ourselves and others.
How we react to situations and events is a sign of how far we have in our learning. Trading[...]
I have been banned from CBOE until next year due to an abundance of days off. However, I can still play with numbers and I decided to take a look at what VIX does on average between the last trading day before Christmas and the first trading day of the following year. This first chart takes the average action from 1990 to 2015. I found it pretty interesting that on average VIX actually rises (18.46 to 19.87), but upon further reflection the dampening impact of holidays getting out[...]
Both equities and options volumes are down dramatically as we head into year end.
The S&P 500 volumes traded were down 26% Monday, 30% Tuesday and 38% Wednesday versus the prior 10 day average.
Options volumes have also been hit, but not as hard.
Total options traded and cleared Monday were down 16% from the prior 10 days. Volumes were down 18% Tuesday and 28% yesterday.
The CBOE's VIX, the most widely followed measure of risk in the markets is down from a post election high of 23% briefly broke[...]
While playing email catch up today I came across an interesting question. Someone noticed that as the market was nearing the close this past Friday (12/16) someone came in and put on a sizable trade using options on the iShares Russell 2000 Index ETF (IWM). With IWM at 135.90 there was a seller of 11,800 IWM Mar 17th 110 Puts for 0.48 who then purchased the IWM Mar 17th 92 Puts for 0.09 and a net credit of 0.39. The payoff at March expiration appears below.
The long 110 strike[...]
More than fifteen CBOE strategy benchmark indexes (including BXD, BXM, BXMC, BXMD, BXMW, BXR, BXRC, BXRD, BXY, CLL, CLLR, CLLZ, CMBO, PUT, PUTR, RXM, VPD, VPN, and WPUT) hit all-time daily closing highs on December 20.
As shown in the first graph and table below, the CBOE Russell 2000 30-Delta BuyWrite Index (BXRD) rose 9% since the November 8 U.S. election (through December 20).
The relatively strong performance of the BXRD Index over the past five weeks possibly could be attributed[...]