Strategy Archives - Cboe Blogs

  • Strategy | Oct 28, 2015, 11:29 AM

    Strategy: 2 Ways To Manage Portfolio Risks With Options

    Strategy: 2 Ways To Manage Portfolio Risks With Options

    In uncertain markets, every investor is fearful about possible losses in a stock portfolio. But other than getting out altogether, what can you do to eliminate that ever-present risk? Here are two options strategies worth considering for portfolio management: Collar for loss prevention. The collar is a smart move when you are holding appreciated stock. Rather than risking a loss due to decline in market value, open a collar. This consists of a long out of the money put and a short out of the money[...]

  • Strategy | Oct 22, 2015, 10:26 AM

    DIARY of a FIRST TIME TRADER – ASSIGNED for the VERY FIRST TIME

    DIARY of a FIRST TIME TRADER – ASSIGNED for the VERY FIRST TIME

    So that happened.  I was selling puts on FIT & I got assigned aka, the price of the stock settled below the put I sold at expiration.  I was obligated to purchase 100 shares of FIT at the strike price I had sold. Let’s recap my trading strategy.  I planned to sell FIT puts until I got assigned and then sell calls….so everything is going according to plan right??? Well not exactly… I sold a 45 strike put back when FIT was trading up around $50.  Ugh. [...]

  • Strategy | Oct 20, 2015, 3:47 PM

    Approaching Earnings Season with Caution

    Approaching Earnings Season with Caution

    The stock market's comeback from the lows reached just two weeks ago is legendary stuff.  Just a year ago the same type of rally occurred with some very powerful price action, a nearly 200 handle move in the SPX 500.  This followed the threat of an ebola crisis, a steep drop of 9.4% from the all time highs amidst an unknown outcome that seemed to cause everyone to pause or even panic.  Of course, that fear subsided quickly and that big rally caught many out of position.  Bears[...]

  • Market News | Technical Analysis & Charts | Strategy | Oct 16, 2015, 12:28 PM

    Weekly Stock Market Commentary: The Bullish Case is Still Strong

    Weekly Stock Market Commentary: The Bullish Case is Still Strong

    The stock market has taken on a much more bullish tone since the late- September lows.  We had several buy signals on September 30th, and they were well-timed.  The bullish case is still strong, even after $SPX has advanced 150 points this month. The $SPX chart is bullish.  $SPX broke out over 2000 last week, and this week it pulled back to that (general) level before moving to new relative highs once again.  Hence the breakout over 2000 was retested, and that retest was successful. Equity-only[...]

  • Strategy | Oct 15, 2015, 3:31 PM

    Branded a Bull or Bear? Just Shake Off the Label

    Branded a Bull or Bear?  Just Shake Off the Label

    We are often asked, ‘are you bullish or are you bearish?’. I am often labeled a ‘perma bull’ because many of my plays are on the bullish side of the market. More recently I have been called a ‘perma bear’, for the very opposite reason. I really don’t care about labels, it’s all about being on the right side of a market trend. We make trades that are bullish or bearish all the time, but the label I want to stick is this one – trader. We can have[...]

  • Market News | Strategy | Oct 9, 2015, 2:39 PM

    Weekly Stock Market Commentary - The Buy Signals are Piling Up

    Weekly Stock Market Commentary - The Buy Signals are Piling Up

    A week ago, we noted that there were three short-term, oversold buy signals. Now, more buy signals are occurring, and these are of the intermediate-term variety. The last hurdle was cleared today, when the $SPX closed above 2000. Equity-only put-call ratios remain on buy signals, as they continue to decline from recent highs. Market breadth has improved greatly during this most recent rally, and has now reached extremely overbought levels. That is not necessarily a bad thing, for we have often stated[...]

  • Market News | Strategy | Oct 7, 2015, 11:47 AM

    Options on MSCI Emerging Markets Index (MXEF) – Volume of 472 Contracts on Tuesday

    Options on MSCI Emerging Markets Index (MXEF) – Volume of 472 Contracts on Tuesday

    On Tuesday, October 6, the CBOE options on the MSCI Emerging Markets Index (MXEF) had reported volume of 472 contracts (236 call options and 236 put options). Why are several investors expressing more interest in the MXEF options that launched earlier this year? Below are four key reasons I have heard from investors. BIGGER NOTIONAL SIZE FOR CASH-SETTLED INDEX OPTIONS As shown in the chart below, many of the cash-settled index options have notional values that are much bigger than the notional[...]

  • Market News | Strategy | Oct 5, 2015, 11:28 AM

    Signs Of Bullish Hope - Weekly Market Outlook

    Signs Of Bullish Hope - Weekly Market Outlook

    Despite the bearish start to the week on Monday and a bearish initial response to Friday morning's employment report for September, the bulls managed to reversal course Friday afternoon to hammer out a big gain for that day and even a small gain for the week. A couple of the key indices even managed to climb back above their short-term moving average lines. There's still work to be done -- from both sides of the table -- if we're ever going to get out of this rut. But, a bullish break out of the[...]

  • Technical Analysis & Charts | Strategy | Oct 1, 2015, 11:35 AM

    Interest Rate Volatility and TYVIX Discussed at RMC Europe

    Interest Rate Volatility and TYVIX Discussed at RMC Europe

    On Wednesday, September 30, in Geneva, Switzerland at the Fourth Annual CBOE Risk Management Conference (RMC) Europe, two experts – (1) Maneesh Deshpande, Managing Director and Head of Equity Derivatives Strategy, Barclays, and (2) David Rogal, Director and Portfolio Manager, BlackRock-- engaged in a discussion of - Focus on Interest Rate Volatility VIX versus TYVIX CBOE/CBOT 10-year U.S. Treasury Note Volatility Index: Similarities and differences Comparing volatility risk premia in rates[...]

  • Strategy | Sep 24, 2015, 2:53 PM

    5 Ways To Compare Naked Puts And Covered Calls

    5 Ways To Compare Naked Puts And Covered Calls

    Everyone has heard that writing naked or uncovered options is extremely high risk. This is not necessarily true. The covered call is risky because a stock's value can fall below the net basis (cost of stock less premium received for the call). But when it comes to the naked put, it's a different story. The way to quantify the risk is to realize that a stock's price can only fall so far. Consequently, the market risk involved with naked puts is far less than those of covered calls. You also have to[...]

  • Market News | Strategy | Trade Ideas | Sep 24, 2015, 10:30 AM

    Earnings Week of 9/28 - 10/2

    Earnings Week of 9/28 - 10/2

    The calendar is light again as we move into early October next week.  Enjoy the silence because the following week we start to see the beginnings of third quarter earnings.  The numbers below represent historical stock price reactions in response to earnings reports for the last three years.

  • Strategy | Trade Ideas | Sep 23, 2015, 2:46 PM

    Trade Idea in SPX: Broken Wing Iron Butterfly

    Trade Idea in SPX: Broken Wing Iron Butterfly

    Define Broken Wing  Iron Butterfly:  call credit spread plus put credit spread with either the put side or call side narrower than the other one. Dan’s example of a Broken Wing  Iron Butterfly: I am going out in duration about 23 days in SPX using the October expiration. I am selling the call credit spread with the width 30 wide and the put credit spread with the width 40 wide. This gives less risk on the upside and more risk on the downside. Both credit spreads are selling the[...]

  • Strategy | Sep 16, 2015, 2:30 PM

    Strategy: 3 Key Points About Covered Calls

    Strategy: 3 Key Points About Covered Calls

    Many options traders view the covered call as a safe strategy. But are they right? The combination of premium income, dividend, and capital gains is quite appealing, without doubt. Selecting the right contract yields double-digit annualized returns. But there are risks. The covered call is not a risk-free strategy, so anyone going into one should be aware of what they face. Here are some points to keep in mind: Downside risk. The covered call provides limited downside protection because the call's[...]

  • Strategy | Sep 10, 2015, 1:31 PM

    3 Key Conservative Option Strategies

    3 Key Conservative Option Strategies

    Can options work in a conservative way and actually help protect your portfolio? Most conservative investors traditionally have seen options as high-risk, speculative plays on short-term market swings. This is understandable when you think of the many high-risk option strategies available. But increasingly, options are going mainstream as even the most risk-averse investors are finding ways to use option contracts to lower risks and protect their long stock positions. Three basic ways this is accomplished: [...]

  • Market News | Trader Talk | Strategy | Trade Ideas | Sep 9, 2015, 3:05 PM

    Trader Taking Advantage of SPX Weeklys and Extended Trading Hours

    Trader Taking Advantage of SPX Weeklys and Extended Trading Hours

    Once a week I like to report about a block trade in this space.  This week I’m going to discuss a trade, but it does not qualify as a block trade.  In fact it is a one lot.  However, this trade is pretty interesting as it takes advantage of two recent developments in the option markets - Weeklys and Extended Trading Hours. I have neighbor who is a pretty frequent trader in the SPX option and S&P futures market.  We’ll call him Larry to protect his identity. [...]