Strategy Archives - Cboe Blogs

  • Market News | Technical Analysis & Charts | Strategy | Jan 22, 2016, 6:00 PM

    Weekly Stock Market Commentary 1/22/16

    Weekly Stock Market Commentary 1/22/16

    Stocks remain under extreme pressure, but it finally looks like the oversold conditions are starting to have some effect. An oversold rally is now underway. You can see, in Figure 1, that $SPX bounced off the support level at 1820. That level was also the low of both April and October 2014. In essence, nearly two years of gains -- back to April 2014 -- had been wiped out at Wednesday's lows. By the time $SPX reached those levels, the oversold conditions were myriad, and a rally has ensued. We expect[...]

  • Market News | Education | Strategy | Jan 15, 2016, 2:51 PM

    The Weekly Options News Roundup – 1/15/2016

    The Weekly Options News Roundup – 1/15/2016

    The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast, online and social media outlets. CBOE 2016: Building on Strengths Earlier this week, CBOE held its annual press luncheons in Chicago and New York, telling the story of how the exchange continues to “collaborate, create and connect “to expand its business. In 2016, the exchange looks forward to introducing new products, reaching customers[...]

  • Market News | Trader Talk | Strategy | Jan 7, 2016, 9:40 AM

    Earnings Week of 1/11 - 1/15

    Earnings Week of 1/11 - 1/15

    Next week things start to heat up in the earnings world.  AA reports on Monday which some consider the beginning of earnings season.  INTC and some financials finish out the week.  The numbers below represent three years of stock price reaction history to earnings announcements with the biggest gain, biggest drop, average move (non-directional) and stock price reaction last quarter.

  • Market News | VIX | Trader Talk | Strategy | Jan 6, 2016, 1:22 PM

    Small Caps in Turmoil, Albeit with Lower Anticipated Volatility

    Small Caps in Turmoil, Albeit with Lower Anticipated Volatility

    The Russell 2000 (RUT) is trading at 1094, 15% off all-time highs, and has only closed lower than this level on one occasion (9/29/15) in the past 14+ months. In October of 2014, amidst the worldwide Ebola scare, RUT closed at 1068 and traded as low as 1018. Implied volatility of RUT options however, is rather sanguine despite the selloff in the benchmark Small Cap index. The CBOE Russell 2000 Volatility Index (RVX) “measures the market’s expectation of 30-day volatility implicit in the[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Jan 5, 2016, 8:22 AM

    Block Trade Analysis - VXX Bearish and Bullish Trades from Monday

    Block Trade Analysis - VXX Bearish and Bullish Trades from Monday

    Days like yesterday get me searching for volatility oriented option trades.  I found two that caught my eye in the VXX option market and debated which one to discuss in this space.  After about three seconds of internal debate I decided to just talk about both. Both trades occurred in the middle of the day yesterday, one is bearish on VXX while the other benenfits if VXX spikes to the upper 20’s.  First the bearish trade. When VXX was at 21.90 there was a seller of the VXX Jan[...]

  • Technical Analysis & Charts | Education | Strategy | Jan 4, 2016, 9:39 AM

    Weekly Market Outlook - New Year, New Chart Problems

    Weekly Market Outlook - New Year, New Chart Problems

    When push came to shove as the end of the shortened trading week (and last week of the year), the bears were doing most of the shoving. Namely, thanks to Friday's last-minute selling, the S&P 500 (SPX) (SPY) finished the week down 0.8%. That translates into a small loss of 0.7% for all of 2015. Will 2016 be any different? That remains to be seen, but we certainly didn't end 2015 on a high note. The good news is, there's little correlation between the market's tone at the end of one year[...]

  • Education | Strategy | Jan 4, 2016, 9:23 AM

    Doing a Post Mortem on the Past Year

    Doing a Post Mortem on the Past Year

    With the beginning of the year upon us, it is a time to reflect on what worked and get an understanding of how to fix what didn't work.  Let's face it, the market moves of 2015 were sharp, jagged and made our heads spin.  While we can look for explanations for why the markets made their moves, that may only just explain a little.  What really needs to happen is to see how we reacted, performed and find solutions to be better in the year ahead.  What do I do?  I do an analysis[...]

  • Market News | Education | Futures | Strategy | Dec 31, 2015, 10:02 AM

    A Look Backward and Forward: CBOE VIX Indexes in 2015 and 2016

    A Look Backward and Forward: CBOE VIX Indexes in 2015 and 2016

    2015 Retrospective: There was no shortage of financial crises or investor alarm over central bank monetary policies, OPEC’s oil policy, and the generally anemic state of the global economy in 2015. Each CBOE VIX Index recorded the level of stress in its underlying sector. As the graphs below illustrate, different triggers struck panic across markets. VIX Index, Volatility Gauge for U.S. Equity Market: The uptrend in expected volatility of the U.S. equity market continued in 2015. The peak[...]

  • Technical Analysis & Charts | Education | Strategy | Dec 22, 2015, 2:35 PM

    2015 Year in Review with Kevin Davitt of the CBOE Options Institute

    2015 Year in Review with Kevin Davitt of the CBOE Options Institute

    Mark your calendars – this is not to be missed! A look back at the year that was in the markets with a little bit of everything. Fundamentals, technical/volatility analysis, options strategy, geopolitics, ideas for 2016 and more. Please join us Tuesday 12/29 at 3:30 PM CST time for this informative and free Webcast. Kevin is a Senior Instructor at the Options Institute. He traded equity and index options on the CBOE and PHLX floor for 8 years. He also has extensive experience[...]

  • Education | Strategy | Dec 22, 2015, 10:52 AM

    Did the Fed Rate Hike Remove Uncertainty?

    Did the Fed Rate Hike Remove Uncertainty?

    If you believe that first move following the first Fed rate hike in nine years, then you believe the market was relieved exhaling.  In a perverse way, the market seemed to be applauding tightening of policy, which is counter to what we have seen for years.  Sure, the near zero interest rate policy (ZIRP) is still in effect, but the irrational behavior is quite remarkable.  While the overall monetary policy is accommodative, a removal of access via higher rates is hawkish behavior -[...]

  • Market News | VIX | Trader Talk | Education | Strategy | Trade Ideas | Dec 20, 2015, 3:30 PM

    Weekly Review - Russell 2000 Options and Volatility - 12/14 - 12/18

    Weekly Review - Russell 2000 Options and Volatility - 12/14 - 12/18

    Small cap stocks continue to languish relative to large cap stocks for 2015.  The Russell 2000 (RUT) was down 0.23% while the Russell 1000 (RUI) lost 0.35% last week.  RUT is down 6.95% for 2015 while the large cap oriented RUI is down only 2.94%.  It’s going to take a small miracle for RUT to close the gap over the next two holiday shortened weeks. The CBOE Russell 2000 Volatility Index (RVX) rebounded relative to VIX last week but finished very close to parity. [...]

  • Strategy | Trade Ideas | Dec 11, 2015, 12:11 PM

    RUT Play into the FOMC

    RUT Play into the FOMC

    With the FOMC meeting scheduled for next Tuesday, December 15, and the announcement of a possible rate hike on 2016 on Wednesday, we are seeing inflated volatility levels across equity markets. VIX (spot) is currently 21.65, whereas the Russell 2000 Volatility Index (RVX) is 22.33. Next week is also expiry, further heightening volatility levels.  The at-the-money SPX Dec 2025 Straddle is priced 53.05, implying a move of about 2.6 percent between now and next Friday’s expiration. [...]

  • Strategy | Dec 10, 2015, 2:08 PM

    3 Joys of a SPX Weekly Iron Butterfly?

    3 Joys of a SPX Weekly Iron Butterfly?

    1) By trading every week, you become a better craftsmen 2) The butterfly has a very good potential reward relative to the risk of the trade. 3)  SPX is a well diversified Index with great liquidity and you don’t have to deal with the risk of individual stocks. Definition: Iron Butterfly is a trade where one puts on an at-the-money call credit spread and an at-the-money put credit spread Trade Example in SPX:  Price is $2065 as I write this. I am looking at the December expiration[...]

  • Market News | Strategy | Dec 9, 2015, 2:00 PM

    Is The Fed’s CCAR Pushing Up the SKEW Index and Driving More Demand for O-T-M SPX Puts?

    Is The Fed’s CCAR Pushing Up the SKEW Index and Driving More Demand for O-T-M SPX Puts?

    In a December 8 Bloomberg news report - “Who's the Bear Driving Up the Price of U.S. Stock Options?” - Joseph Ciolli wrote – “For more than a year, dealers in the U.S. equity derivatives market have noted a widening gap in the price of certain options. If you want to buy a put to protect against losses in the Standard & Poor’s 500 Index, often you’ll pay twice as much as you would for a bullish call betting on gains. New research suggests the divergence is[...]

  • Strategy | Dec 8, 2015, 11:23 AM

    For The Fed, Timing is Everything

    For The Fed, Timing is Everything

    It appears we are about to see the Federal Reserve raise the funds rate for the first time in more than eight years.  The rate has been at/near zero for an astoundingly long period of time.  Yet, there is fear out there, most of it unfounded.  What if the Fed is so hawkish that they raise rates quickly as they have done in the past?  Of course, that is absurd if inflation stays low and the Fed has said as much, but should we believe them?  If policy is set by the smartest[...]