Trade Ideas Archives - Cboe Blogs

  • Market News | Trader Talk | Education | Trade Ideas | Oct 4, 2015, 7:30 AM

    The Week in Russell 2000 Trading - 9/28 - 10/2

    The Week in Russell 2000 Trading - 9/28 - 10/2

    For the second week in a row large cap stocks outperformed small cap stocks by about 1.5%.  The big difference this week was that the Russell 1000 (RUI) was higher while the Russell 2000 (RUT) lost value.  The previous week RUI lost less than RUT, but both had pretty lousy weeks.  For the year RUI is now down a little more than 5% while RUT has lost just over 7.5%. The CBOE Russell 2000 Volatility (RVX) index finished the week at a little over a 10% premium to VIX.  This lack[...]

  • Market News | Trader Talk | Trade Ideas | Oct 2, 2015, 12:34 PM

    Earnings Next Week - 10/5 - 10/9

    Earnings Next Week - 10/5 - 10/9

    Of the companies reporting next week my favorite to watch is YUM! Brands (YUM).  About half their sales come from China and in my mind this is one of the best ways to get an idea what is going on in that part of the world.  As always the numbers represent the last 12 earnings announcements.

  • VIX | Trader Talk | Trade Ideas | Oct 2, 2015, 12:29 PM

    I'm Way Out on the Ice

    I'm Way Out on the Ice

    Let me get right down to numbers, since there will be a lot of numbers amongst the words. In the last post I detailed a bunch of long calls, and an update on those is overdue.  In review:  I had allocated a large (to me) (when it is a risky proposition) amount of money toward seven of the December SVXY calls at the 40 strike, paying about $12.30 each for them (translated to real cost:  $1,230.00 each or $8,610 in total - I'm rounding and ignoring commissions here) when SVXY was about[...]

  • VIX | Trader Talk | Education | Futures | Trade Ideas | Sep 27, 2015, 2:20 PM

    New White Paper Discusses Volatility as a Small Cap Portfolio Hedge

    New White Paper Discusses Volatility as a Small Cap Portfolio Hedge

    A new white paper from our partners over at Russell Indexes Research discusses the merits of using futures on the CBOE Russell 2000 Volatility Index (RVX) to hedge small cap risk.  In the paper “RVX futures as a hedge for small cap-specific risk” Barry Feldman covers volatility products that are currently available to hedge downside risk in equity portfolios and then goes on to compare using VIX futures and RVX futures to hedge a small cap focused portfolio. Feldman uses the market[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 27, 2015, 7:01 AM

    The Week in Russell 2000 Trading - 9/21 - 9/25

    The Week in Russell 2000 Trading - 9/21 - 9/25

    For the previous couple of weeks small cap stocks were the place to be.  That fad came to an abrupt end last week as the Russell 2000 (RUT) dropped almost 3.5%.  Over the same period of time the large cap focused Russell 1000 (RUI) was lower by 1.57%.  In addition to trailing RUI for the week, RUT is now 6.8% lower for 2015 while the RUI is down 5.92%. For a while it appeared the CBOE Russell 2000 Volatility Index (RVX) was going to return to ‘normal’ levels when compared[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 26, 2015, 2:05 PM

    The Week in VIX - 9/21 - 9/25

    The Week in VIX - 9/21 - 9/25

    The S&P 500 lost just over 1% and VIX rose 6% and the standard near dated futures were higher as well, but lagged a bit.  This resulted in the curve a bit more backward than it was a week ago. On the short dated futures front the contract expiring this coming Wednesday finished the week at a small discount to VIX while a week ago the contract that settled this past Wednesday was at a slight premium to VIX.  I’m still getting familiar with the short dated curve which move from[...]

  • Market News | Education | Trade Ideas | Sep 24, 2015, 8:26 PM

    RMC Europe Day 3 Preview

    RMC Europe Day 3 Preview

    The final day of the Fourth Annual European Version of CBOE’s Risk Management Conference gets started with a keynote address from Edward Chancellor a noted financial author and historian.  Chancellor’s address is titled, “The Consequences of Extraordinary Monetary Policy – An Historical Perspective on the Current Environment”. After the keynote address the balance of the morning is filled with a wide variety of presentations.  Hitendra Varsani from Morgan Stanely[...]

  • 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[...]

  • Market News | Trader Talk | Trade Ideas | Sep 21, 2015, 12:40 AM

    Earnings Next Week - 9/21 - 9/24

    Earnings Next Week - 9/21 - 9/24

    We are still in a pretty light period as far as earnings announcements go.  Things don't kick off until Thursday with ACN in the morning and NKE and BBBY in the afternoon.  As always the numbers below depict the last three year's worth of stock price reactions to earnings announcements.

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 19, 2015, 12:00 PM

    The Week in VIX - 9/14 - 9/18

    The Week in VIX - 9/14 - 9/18

    VIX was slightly lower despite the S&P 500 dropping a little last week.  I would not read anything into this slight market anomaly(both SPX and VIX dropping last week).  VIX actually showed the type of behavior we are accustomed to with equity implied volatility leading up to and after an earnings report.  Just think of the FOMC announcement as a kind of earnings announcement for the equity markets. The September contract settled Wednesday last week and now October is the front[...]

  • VIX | Trader Talk | Trade Ideas | Sep 16, 2015, 9:24 AM

    I Don't Usually Trade Long Options...But When I Do

    I Don't Usually Trade Long Options...But When I Do

    Who buys calls?  Who buys puts?  I often wonder this, as I am usually the one selling them to others.  Do buyers really think they're going to profit from them?  Is a real person buying them?  Is it a bank, or a "market maker" (they are people, right?  I admit I'm confused about those mythical creatures.) Anyway, it's a rare happenstance that I think a call or put is worth buying.  One thing that makes an option attractive to me is its structure of being[...]

  • VIX | Trader Talk | Education | Trade Ideas | Sep 13, 2015, 2:06 PM

    The Week in Russell 2000 Trading - 9/8 - 9/11

    The Week in Russell 2000 Trading - 9/8 - 9/11

    Small and large cap stocks moved higher in sync last week with both the Russell 1000 (RUI) and Russell 2000 (RUT) gaining about 2%.  Both are still lower for the year with RUI down 4.32% and RUT down 3.89%. On the volatility front VIX finished the week at about a 5% discount to the CBOE Russell 2000 Volatility Index (RVX).  Historically RVX is usually at about a 20% premium to VIX, however, in times of global crisis or higher levels of volatility the two tend to converge.  The recent[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 13, 2015, 9:59 AM

    The Week in VIX - 9/8 - 9/11

    The Week in VIX - 9/8 - 9/11

    VIX dropped last week, which it tends to do when the S&P 500 is up 2%, but the futures curve remains in a state of backwardation.  The continued backwardation honestly surprises me when the risk everyone is talking about comes after September contracts settle on the open Wednesday of this week.  It may just be that there is more to be worried about than the pending Fed announcement. The weekly VIX curve shifted lower as well.  Having five consecutive weekly VIX futures expirations[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 12, 2015, 10:43 AM

    The Week in Volatility Indexes and ETPs - 9/8 - 9/12

    The Week in Volatility Indexes and ETPs - 9/8 - 9/12

    The VXST – VIX  - VXV – VXMT curve shifted dramatically to the downside last week in response to the S&P 500 recovering about 2% of recent losses.  The highlight here for me is that VXST is still at a premium to VIX, although the difference is very slight.  All eyes are on the Fed this coming week.  I’m going to attribute this short term volatility premium to the market preparing for the known unknown of how the financial markets will react to the Fed statement. As[...]