Cboe Blogs

Small cap stocks get so close and then seem to fall back when reaching unchanged on the year or catching up with the performance of large cap stocks. This week the Russell 2000 (RUT) dropped 1.44% while the large cap focused Russell 1000 (RUI) lost 0.49%. This places RUT in the red by 1.86% for 2016 while RUI is still up 0.55%. With the underperformance of small cap stocks last week came a relative rise in the CBOE Russell 2000 Volatility Index (RVX). The RVX / VIX premium began the[...]

With the recent launch of cash-settled options on FTSE China 50 Mini-Index (Ticker: FXTM), traders have an opportunity to express a view on the Chinese market or movement in volatility is available. Based on 50 of the largest and most liquid Chinese stocks (H Shares, Red Chips, and P Chips) trading in Hong Kong, cash-settled options on the FTSE China 50 Mini-Index is now listed on CBOE. FTSE China 50 Index Price & Volatility FTSE China 50 Index price movement changes on a monthly basis is typically[...]

"Great traders have passion, confidence, an edge and a game plan. They are prepared, They keep their system simple.” - Gavin McMaster I have been option trading for several years, and while my results have been up/down - what is important is that I have survived many different market cycles.  That should tell you a great deal, as surviving in this jungle call the 'market' without a life preserver is a difficult but not impossible task.  To me, success is not all about the bottom[...]

Things are relatively quiet today with the S&P 500 topping 2100 for the first time in months and then losing its grip on that round number. However, despite the relative quiet a big trade hit the VIX pit just before lunch time that has traders talking. There were four legs to the trade, which turned out to be a large volatility player rolling a position from May to July. I have no idea what they have against June. A May spread was exited – Sell 82,129 VIX May 23 Calls at 0.43 + Buy 164,242[...]

The market didn't end last week on a particularly bullish foot, but it doesn't matter  - it started the week on such a bullish foot the S&P 500 (SPX) (SPY) was still up 1.6% for the week, and still above a fairly important resistance line. The strength still doesn't outright guarantee stocks will keep moving higher. In fact, even if stocks were in a great technical position to keep edging higher, we're once again running into a valuation headwind. We'll dissect all of it below, right[...]

In 2011 I received an email from an experienced options manager that stated -- “The introduction of BXM by the CBOE and the exchange’s continued support has created a new covered call asset class that fits well into the move to lower volatility equity products.  BXM gives us a much better accepted benchmark than is available in the Low Vol equity world.  We have been getting a lot interest, RFP’s etc. as consultants and institutional investors accept the notion of lower[...]

It's too soon to assume the worst yet.  On the other hand, it's not too soon to prepare for the worst even as we hope for the best. Last week, stocks lost ground for the second time in three weeks.  More than that, the major indices are now putting a great deal of pressure on some critical support levels.  Worse still, we're seeing clear signs of waning bullish momentum.  That's not to say that bearish momentum has developed yet.  It is to say, however, this is how bearish[...]

The S&P 500 lost a little over 1.2% last week, but the impact on volatility indexes was more than one would expect from loss like that for the S&P 500. Most significant to me was that both the 3-month (VXV) and 6-month (VXMT) S&P 500 oriented volatility indexes returned to average 2015 levels. This was something I was a bit obsessed with to begin 2016. The shorter end of the curve is still below last year’s average, but a few more weeks like last week and we will be right back to[...]

I started last week at the FTSE Russell offices participating in a panel discussion that focused on small cap stocks. It was hard to come up with much on the positive side as the Russell 2000 has struggled over the past few months. Every once in a while it appears RUT is about to gain upside traction, but those glimmers of hope seem to be short lived. Last week RUT was down 1.8% while the large cap focused Russell 1000 (RUI) was down about 1.2%. RUI finished the week at up 0.02% for 2016 while RUT[...]

Some trading lessons are invaluable.  One of the best is to be agnostic and without a bullish or bearish bias. As the markets move up and down we often find ourselves positioned in one camp or the other.  Naturally, on the sidelines technically means we are neutral, but often it is 'bullish with a bias to wait'.  I'm not into labels.  Why?  Because it puts us all in a frame of mind where we have bias, and in this market if you are biased then you lose your quickness and flexibility. Having[...]

The S&P 500 was slightly lower last week, ruining a five week winning streak.  This gave three of the four volatility indexes on the chart below a chance to rebound from 2016 lows.  The exception is VXST, but we give this one a break since three day weekends are always tough on VXST. The choppiness in the volatility space last week, along with the front month future actually losing a little value did no favors for the VIX related ETPs.  UVXY was up almost 9% for the week early[...]

Time for another trading lesson.  Back in 1996 I took a job with Sunkist Growers as their Pension and Investments Manager.  I was hired to manage pension assets for a mature fund.  By mature this means there were many beneficiaries drawing monthly pensions, and as the company had been around 100 years the plan was old, I was charged with stepping up the pace of returns relative to the minimum required contribution by the company owners. The 90's were a time when markets started to[...]

The completion of the powerful, bottoming "W" formation at the beginning of March was the launchpad for this leg of the rally. It has more room to run. Equity-only put-call ratios continue to remain on buy signals. The standard chart has seen a slight "wiggle" develop this week, but it does not dissuade the computer programs from continuing to say that these ratios are solidly on buy signals. Market breadth continues to be strong. Both oscillators are currently on buy signals,[...]

It's a very quiet week next week on the earnings front with the highlight being NKE.  The numbers below represent three years of history.   After the ticker the columns show the biggest gain, biggest drop, average move (non-directional) and stock price reaction last quarter.  

Forecasting is fun, but it leads to many errors in the process.  We hear them all time, someone trying to be a hero but often failing miserably in their predictions.  I read a quote last week by Howard Simons of the 'Iron Law' of forecasting (for economists):  Give 'em a number or give 'em a date, but don't ever give 'em both.  Indeed, trying to forecast is quite difficult, one can go back and forth from hero to goat several times.  Keep laying out a forecast and eventually[...]