Strategy Archives - CBOE Blogs

  • Harnessing Twitter Sentiment and the Volatility Risk Premium – Events in NYC on March 28th and in Chicago on April 5th

    At the 33rd Annual CBOE Risk Management Conference in California last week, several speakers discussed ways to use sentiment analysis and the volatility risk premium in their quest to add alpha and enhance the risk-adjusted returns of their portfolios. I am pleased to report that two upcoming events will provide more details and analysis of the topics of developing investable and actionable intelligence from analysis of sentiment trends on social media, and generating attractive risk-adjusted returns[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Mar 5, 2017, 8:08 AM

    Weekend Review of Volatility Indexes and ETPs - 2/27/2017 - 3/3/2017

    Textbook and parallel are two terms that come to mind to described the shift in the VXST – VIX – VXV – VXMT curve below.  Also, steep comes to mind as the longer dated indexes are pretty elevated when compared to VIX and VXST. The long funds below benefited from volatility increasing a bit on Tuesday last week, with VIX even putting in a 2017 high, before resuming their downward trajectory.  Note TYVIX giving up 10% which puts the volatility of 10-Year Treasury Note options[...]

  • Market News | VIX | Strategy | Trade Ideas | Feb 19, 2017, 9:29 AM

    Weekend Review of VIX Futures and Options - 2/13 - 2/17

    We’ve experienced several twists in the volatility markets this year where the futures don’t move in sync or in line with spot VIX.  This occurred again last week as VIX rose almost 6% while the futures markets moved lower.  Part of this may be attributed to February going off the board, at least with respect to March, but the farther date futures had been a bit elevated this year, but with the lack of any sort of volatility event appear to have started to weigh on the farther[...]

  • VIX | Trader Talk | Strategy | Trade Ideas | Feb 16, 2017, 10:49 AM

    Block Trade Analysis - Large Bullish 1 x 4 VIX Option Trade

    I’m on the road today playing an academic, but regardless of how far I am from CBOE I still am fortunate that I’m constantly keep in the loop about big trades.  I got a heads up this morning that a VIX Mar 15 – 22 1 x 4 Call spread traded in the VIX pit a few minutes after the open.  My assumption was the trader bought the 15’s and sold the 22’s (I was wrong) mainly because all the big trades seem to be based on a low volatility outlook.  Also, my incorrect[...]

  • Market News | Trader Talk | Strategy | Trade Ideas | Feb 15, 2017, 7:40 PM

    Block Trade Analysis - Large RUT Bear Call Spread

    As the Russell 2000 (RUT) continues to move into uncharted territory at least one trader believes 1500 is not achievable.  At least not through standard March (3/17) expiration.  Early today when RUT was around 1393 (much lower than today’s close) a pretty big trade came into the RUT post.  Specifically, they was a seller of 37,601 RUT Mar 1490 Calls at 1.42 who then purchased 37,601 RUT Mar 1510 Calls for 0.95.  The result is a net credit of 0.47 and a payoff at RUT AM[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Feb 6, 2017, 7:44 AM

    Weekend Review of Russell 2000 Options and Volatility - 1/30 - 2/3

    Small caps continue to close the gap on large cap stocks as the Russell 2000 (RUT) gained 0.52% last week while the Russell 1000 (RUI) was up by 0.18%.  On the volatility front the CBOE Russell 2000 Volatility Index (RVX) remains at the historical high end of value relative to VIX.  This can be attributed to VIX hovering around multiyear lows as much as RVX not following VIX to the lowest end of the range.   On Monday, as the first trading day of the week came to a close one trader[...]

  • Education | Strategy | Jan 30, 2017, 3:38 PM

    Trading to Win? Break Those Bad Habits

    We are all creatures of habit, and with so much going around us in our lives at the speed of light we tend to fall into some set routines. That is often the case for us as option traders, and while some routines are efficient and allow us to make quick decisions, others can be quite harmful and cause some dangerous missteps.  Many of us are unaware of these habits, they become instinctual.  When that occurs the bad habits become tough to break. Our habitual characteristics are different[...]

  • Market News | Strategy | Jan 9, 2017, 4:53 PM

    Technical Resistance in AMZN?

    It's pretty clear that AMZN has been in a buy mode recently.  It is possible that we do see even higher prices in this stock.  I do however want to throw up a caution flag here for a couple of reasons.  First, we have met the initial upside targets off our last trade setup in this stock.  Second, we are moving into a couple of key resistance clusters defined by Fibonacci price relationships.  They come in at 801.31-807.55 and then 813.95-819.00.  Third, I'm seeing a[...]

  • Market News | Education | Strategy | Dec 19, 2016, 9:33 AM

    Learn Trading in Different Dimensions

    As traders and investors, we often see outcomes through the prism of win or lose. We will all have both over time, trading is not a game of perfect.The goal of course is to win more than you lose. Some measure their success where they make it into the win/loss column, and while it's true we can only grow our accounts with more wins than losses, to me it's not the only measure of success. But one of the toughest emotions to overcome is a bias toward direction, when what really needs to be examined[...]

  • Market News | Trader Talk | Strategy | Trade Ideas | Dec 8, 2016, 1:11 PM

    Block Trade Analysis - Buyer of 250,000 XLF Jan 20th 25 Calls

    All of equity market sectors the financial sector seems to have benefited the most since Donald Trump was elected President back on November 8th.  Note on the price chart below that as of mid-day today the Financial Select Sector SPDR Fund (XLF) is up about 19% since election day. Apparently one trader expects this bull run for XLF to continue into the new year.  This morning, less than 90 minutes into the trading day, there was a buyer of 250,000 XLF Jan 20th 25 Calls for 0.13. [...]

  • Market News | Strategy | Dec 5, 2016, 9:06 AM

    A Market Under Distribution Has No Mercy

    After a robust market rise on good turnover after the election, we find ourselves a month later wondering what is next.  Many thought a Trump victory was indeed the elixir needed to get the economy and markets moving, and that sentiment was pronounced immediately with a bullish market response.  Further, bonds were trashed, an amazing allocation shift that happened swiftly and with bold strokes. Markets tend to punish complacency when you least expect it.  As the volatility was sucked[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Dec 4, 2016, 5:05 AM

    Weekend Review - VIX Options and Futures - 11/28 - 12/2

    VIX gained over 14% last week as volatility rose in reaction to a 1% drop in the S&P 500.  It is hard to quantify, but I’m thinking that a part of the rise is VIX can be attributed to the vote going on in Italy this weekend.  Note that the curve shift was not exactly uniform and the futures lagged the move in the index.  Barring a volatility spike in reaction to this weekend or some other unforeseen market moving event, I would not be surprised to see the VIX curve return[...]

  • VIX | Trader Talk | Education | Strategy | Trade Ideas | Dec 1, 2016, 2:47 AM

    Long Volatility Discussion at CBOE RMC

    Govert Heijboer from True Partner Advisor and James Murray from NSW Treasury Corporation split the duties for a discussion titled Implementing Long Volatility Exposures for Hedging and Alpha today in Hong Kong. Murray led off by discussing risk management and the objectives of long volatility risk management strategies.  He noted that there is no free lunch when getting long volatility exposure and strategies are a trade-off between convexity, timing, basis and time decay.  A final thought[...]

  • Market News | Education | Strategy | Trade Ideas | Nov 30, 2016, 1:12 AM

    Wide Variety of CBOE Benchmark Indexes Discussed at RMC

    Matt Moran and Bruce Traan, both from CBOE, delivered the second session at this year’s CBOE Risk Management Conference in Hong Kong.  Bruce kicked things off with a discussion titled “New Developments in Options and Volatility-Based Benchmarks”.  Matt followed with “Options and Volatility Based Benchmark Indexes”. Bruce noted that demand for passive investing is growing and smart-beta is the fastest growing segment of passive investing.  He highlighted[...]

  • Trader Talk | Education | Strategy | Trade Ideas | Nov 29, 2016, 11:49 PM

    Dan Passarelli Discusses Getting a Volatility Edge

    The first presentation at the 2nd Annual Asian version of CBOE’s Risk Management Conference featured an informative tutorial from Dan Passarelli of Market Taker Mentoring.  Dan’s talk was titled Directional Options Strategies and Trade Management. He kicked things off with a quick review of the option greeks and then dove into directional strategies.  He emphasized that trades can start with a directional outlook, but there are other factors that come into play with respect[...]