Strategy Archives - CBOE Blogs

  • 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[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Jul 10, 2016, 12:18 PM

    Weekend Review - VIX Options and Futures - 7/5/2016 - 7/8/2016

    Weekend Review - VIX Options and Futures - 7/5/2016 - 7/8/2016

    VIX finished the week at 13.20 – only 0.10 higher than lowest 2016 close of 13.10.  The front month (July) futures contract was down slightly more than VIX this past week.  Anecdotally I’ve noticed in the past when we see VIX down significantly in reaction to the employment number that the front month contract seems to give up extra value.  I attribute this to a lack of anticipated market news after the employment number until expiration. At least on trader[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Jul 8, 2016, 10:59 AM

    Gold - Where's the Risk?

    Gold - Where's the Risk?

    I’ve kept my eye off gold this year and boy have I missed a ride. The GLD ETF is up about 28% in 2016 which leaves most markets in the dust. Apparently #Gold is a trending topic today on Twitter as well. S0 even though the shiny metal is higher, is there any opportunity being anticipated for the rest of 2016? To get a feel for what the market thinks, I always consult option implied volatility. Luckily CBOE has the CBOE Gold ETF Volatility Index (GVZ) where I can get an idea if option[...]

  • 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[...]

  • 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[...]

  • 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 | 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[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Jun 26, 2016, 6:30 PM

    Weekend Review - Russell 2000 Volatility and Options - 6/20 - 6/24

    Weekend Review - Russell 2000 Volatility and Options - 6/20 - 6/24

    Both large and small cap stocks got hit on a week over week basis, with the Russell 2000 (RUT) holding up slightly better (-1.47%) than the Russell 1000 (RUI) which lost 1.62%. For the year both are down less than 1% with RUI holding a slight year to date performance edge of 0.40%. In the past when there is heightened concern regarding the global equity markets the RVX / VIX premium tends to drop to low level. That happened in early 2016 and that happened again Friday as the premium[...]

  • Strategy | Jun 24, 2016, 3:19 PM

    Why A Non-Directional Trade Did Well Today Despite the Big Move

    Why A Non-Directional Trade Did Well Today Despite the Big Move

    Trade #1 did absolutely great today, and it was a basic non-Directional trade that made 20% today with the market going drastically against us. The trade was a balanced Butterfly trade in SPX in the August 19 expiration, and the width of the Butterfly was 40.The trade was put on yesterday when SPX was around 2105.The trade was put on using all Calls. Here is the trade using a 1 contract example. Buy 1 2065 and sell 2 2105's and Buy 1 2145. I bought some units at $5.40, $5.30, and $5.20. A unit[...]

  • VIX | Trader Talk | Strategy | Trade Ideas | Jun 22, 2016, 1:53 PM

    Taking Apples from Somewhere Near the Top of the Tree

    Taking Apples from Somewhere Near the Top of the Tree

    The best way to tell a story (well, maybe not always) is to tell it in the order in which it happened. In this case, I'll start where I left off, and that means to describe the mystery position I took at the end of the last post. I made mention of it, but did not divulge it. It turns out I opened and closed that position all on the same day, so that by the time my last article went to press, it was already in the can. Here's the rundown for my June 3rd open/shut: Pictorial illustration of the entry[...]

  • Technical Analysis & Charts | VIX | Futures | Strategy | Jun 20, 2016, 1:24 PM

    Weekly Market Outlook - Will Support Hold?

    Weekly Market Outlook - Will Support Hold?

    The bulls did everything they could to get the rally back on track last week after the early breakdown. But, it just wasn't meant to be. Once the S&P 500 (SPX) (SPY) fell under the 50-day moving average line on Wednesday, the index -- despite trying -- just couldn't climb back above it. When all was said and done, the market lost 1.18% of its value last week. Still, stocks have a few rabbits they could pull out of a hat and move higher rather than losing any more ground. And, even if they[...]

  • Market News | Trader Talk | Strategy | Jun 20, 2016, 10:55 AM

    Jobs Report Shocks the Federal Reserve into Submission

    Jobs Report Shocks the Federal Reserve into Submission

    There is no doubt the Federal Reserve committee dialed it back significantly from the recent 'rate hike' rhetoric we have been hearing about lately.  It was only a month ago we heard most of the Fed Governors boldly claim a rate hike was coming and probably sooner than everyone believed. However, they presented a mixed picture of the economy, seeing some growth areas but weakness in others. This from their recent statement:  Information received since the Federal Open Market Committee met[...]

  • Weekend Review - Volatility Indexes and ETPs - 6/13 - 6/17

    Weekend Review - Volatility Indexes and ETPs - 6/13 - 6/17

    The VXST – VIX – VXV – VXMT curve moved from contango to an unusual shape this past week. Lots of things point to the markets being concerned about next week’s ‘should I stay or should I go’ vote in Britain. VXST represents short term SPX option volatility and the options that expire just after the vote are feeding that calculation.  I’m going to say results in VXST finishing the week at such an elevated level last week have a little to do with Brexit. With[...]

  • Market News | VIX | Trader Talk | Futures | Strategy | Trade Ideas | Jun 17, 2016, 11:00 PM

    Weekend Review - VIX Futures and Options - 6/13 - 6/17

    Weekend Review - VIX Futures and Options - 6/13 - 6/17

    I’ve been around long enough to remember when the time in the markets between Memorial Day and Labor Day were quiet enough for traders to spend several afternoons at Wrigley field without feeling they were missing anything. This past week no one could have gotten away with playing hooky. As the stock market came under pressure, VIX climbed to the highest levels we have seen since February. Everyone is focused on Brexit as the ‘reason’ for the markets to be doing what they are doing.[...]

  • Technical Analysis & Charts | VIX | Futures | Strategy | Jun 13, 2016, 11:08 AM

    Market Outlook - Market Looks Vulnerable Here

    Market Outlook - Market Looks Vulnerable Here

    The market was on pace to a decent gain last week.... until Friday. With that day's stumble, an intraweek gain of 1.0% turned into a 0.14% loss for the five-day span. Worse, the shape and location of last week's intraweek reversal hints that the tide may have finally turned bearish. Of course, in this market, such hints don't necessarily mean a lot. We'll dissect it all below as usual, after painting with some broad brush strokes of economic data. Economic Data As was noted a week ago, there[...]