Trade Ideas Archives - CBOE Blogs

  • Trader Talk | Education | Strategy | Trade Ideas | Nov 29, 2016, 11:49 PM

    Dan Passarelli Discusses Getting a Volatility Edge

    Dan Passarelli Discusses Getting a Volatility Edge

    The first presentation at the 2nd Annual Asian version of CBOE’s Risk Management Conference featured an informative tutorial from Dan Passarelli of Market Taker Mentoring.  Dan’s talk was titled Directional Options Strategies and Trade Management. He kicked things off with a quick review of the option greeks and then dove into directional strategies.  He emphasized that trades can start with a directional outlook, but there are other factors that come into play with respect[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Nov 26, 2016, 6:01 AM

    Weekend Review - Russell 2000 Options and Volatility - 11/21 - 11/25

    Weekend Review - Russell 2000 Options and Volatility - 11/21 - 11/25

    Small cap stocks seem to love the outcome of the election.  Since the market close on election-day the Russell 2000 (RUT) is up over 12% while the Russell 1000 (RUI) has gained just over 3%.  The 10% lead that RUT has on RUI has just about all come from the post-election rally for small caps.   The CBOE Russell 2000 Volatility Index (RVX) over VIX premium finished just under 47% this past week.  This is the second highest level for 2016.  A combination of higher[...]

  • Market News | Trader Talk | Strategy | Trade Ideas | Nov 22, 2016, 8:16 PM

    Block Trade Analysis - MDT Earnings

    Block Trade Analysis - MDT Earnings

    Shares of Medtronic (MDT) took it on the chin Tuesday in response to their most recent earnings report.  The average move for the stock over the last three years was up or down about 2% and the biggest drop over that time period was just over 4%.  Those numbers truly contrast with the recent 8.7% drop. Midday Monday, someone who had a pretty bearish outlook for MDT shares purchased 2500 MDT Nov 25th 79 Puts for 0.38.  To help pay for those options they also sold 2500 MDT Nov 25th 84[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Nov 20, 2016, 8:08 AM

    Weekend Review - Russell 2000 Options and Volatility - 11/14 - 11/18

    Weekend Review - Russell 2000 Options and Volatility - 11/14 - 11/18

    The Russell 2000 (RUT) widened its lead on the Russell 1000 (RUI) after trouncing the large cap index the previous week.  For the year, RUT is up about 15.8% while RUI is up one basis point under 7%.  If you had been fortunate enough to pick the bottom in RUT you would be up just shy of 38% since February of this year. Volatility spreads, as measured by the CBOE Russell 2000 Volatility Index (RVX) divided by VIX have widened out as they tend to do so in periods of low volatility. [...]

  • Market News | VIX | Trader Talk | Trade Ideas | Nov 19, 2016, 12:48 PM

    Weekend Review - Volatility Indexes and ETPs - 11/14 - 11/18

    Weekend Review - Volatility Indexes and ETPs - 11/14 - 11/18

    The short end of the VXST – VIX – VXV – VXMT curve took it on the chin as the holiday effect took a toll on VXST.  We may see a bit of a rise in VXST relative to the rest of the SPX oriented indexes as we get the Thanksgiving holiday behind us. VIX is what everyone watches when assessing market risk.  VVIX is what the volatility traders look to when trying to gauge how other volatility traders are feeling about the markets.  VVIX has dropped a bit, but[...]

  • VIX | Trader Talk | Trade Ideas | Election & VIX | 2016 Recap | Nov 19, 2016, 11:57 AM

    Weekend Review - VIX Options and Futures - 11/14 - 11/18

    Weekend Review - VIX Options and Futures - 11/14 - 11/18

    VIX returned to being a ‘tween’ this week finishing with a twelve handle.  The rest of the curve shifted lower as all fear with respect to a Trump administration seems to have dissipated.  At least for the moment.  There are some risk events between now and the end of 2016 which I’ll address after the table below. CBOE’s partner LiveVol has a great option analyzing tool and one of the features is that you can easily see At-the-Money implied volatility for different[...]

  • Block Trade Analysis - Bearish RUT Broken Wing Butterfly

    Block Trade Analysis - Bearish RUT Broken Wing Butterfly

    I got a heads up this morning about a pretty darn interesting trade that came into the Russell 2000 (RUT) pit this morning.  With RUT around 1300 there was a put butterfly that is looking for the small cap benchmark to be about 100 points lower on January 20th of next year.  Not only is that standard option expiration date it is also the day we will inaugurate our next president. The specific trade involved buying 7,000 RUT Jan 1240 Puts for 20.50, selling 14,000 RUT Jan 1200 Puts at 12.80,[...]

  • VIX | Trader Talk | Trade Ideas | Election & VIX | 2016 Recap | Nov 15, 2016, 3:46 PM

    If a Trump Presidency Is Scary Why Is VIX So Low?

    If a Trump Presidency Is Scary Why Is VIX So Low?

    The world continues to adjust to the idea of a Trump presidency and there seems to be a lot of fear abounding.  For instance, I recently heard an economist state that he didn’t think even Donald Trump knows what action he’ll take as President.  We will all know the answers to what he’s going to do soon enough.  A question I recently got was, “If Trump is so scary why is VIX low?”  That’s a question I can answer. There are two types of government[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Nov 14, 2016, 7:05 PM

    A Quick Look at Market Risk Through the End of 2016

    A Quick Look at Market Risk Through the End of 2016

    As the recent election drew near I would periodically post a chart showing the implied volatility for ATM SPX options over the many expirations we have available for trading.  Just for the heck of it I checked in on SPX implied volatility for every expiration available until the end of 2016.  The shape was interesting with a couple of bumps that occur around known events which may impact the equity market.  I decided to get out a calendar and see what other potentially market moving[...]

  • Earnings Week of 11/14 - 11/18

    Earnings Week of 11/14 - 11/18

    Earnings moves to being all about retail - I personally am looking forward to company outlooks for the holiday shopping season.  As always the data below is based on the last three years of earnings results unless the ticker is in italics.  The columns show the biggest rally, biggest drop, average move, and what the stock did last quarter in reaction to earnings.  Finally, double check the earnings dates as not all were confirmed.  

  • VIX | Trader Talk | Trade Ideas | Election & VIX | 2016 Recap | Nov 13, 2016, 12:12 PM

    Weekend Review - Volatility Indexes and ETPs - 11/7 - 11/11

    Weekend Review - Volatility Indexes and ETPs - 11/7 - 11/11

    Regardless of the outcome, we all expected VXST to get routed last week and that’s exactly what happened.  I’ve worn this out, but the election was like an earnings announcement with respect to the broad-based equity markets.  We see volatility crushes occur on short dated options when a company reports and we saw that for SPX options this past week. The highlight of the table below is TYVIX.  Uncertainty came out of stocks, but made its way into the fixed[...]

  • VIX | Trader Talk | Trade Ideas | Election & VIX | 2016 Recap | Nov 13, 2016, 7:56 AM

    Weekend Review - VIX Options and Futures - 11/7 - 11/11

    Weekend Review - VIX Options and Futures - 11/7 - 11/11

    If a tree falls in the woods and no one is there to hear it did it make a sound?  More appropriately for this space, if market fear increases during non-US market hours was there any increase in fear?  Before this election this could be a philosophical debate among those of use that follow market volatility.  Now we know that the answer is yes.  I’ve already touched on the overnight market action in November VIX futures and the S&P 500 futures contracts so I won’t[...]

  • Market News | Trader Talk | Trade Ideas | Nov 12, 2016, 2:40 PM

    Weekend Review - Russell 2000 Options and Volatility - 11/7 - 11/11

    Weekend Review - Russell 2000 Options and Volatility - 11/7 - 11/11

    Last week the Russell 2000 (RUT) beat the Russell 1000 (RUI) down like a college football team trying to make a statement and qualify for a spot in the playoff.  RUT was up over 10% in reaction to the outcome of the US election while the large cap (and more internationally focused) RUI gained just under 4%.  The race to the end of the year was close, but now RUT has about a 7% lead on RUI. In an interesting twist, the CBOE Russell 2000 Volatility Index (RVX) moved up relative[...]

  • Trader Talk | Trade Ideas | Election & VIX | 2016 Recap | Nov 10, 2016, 7:38 PM

    Trump Victory = Divergence Between U.S. & Emerging Equity Markets

    Trump Victory = Divergence Between U.S. & Emerging Equity Markets

    Emerging market equities lead the charge in 2016 until Tuesday’s U.S. Presidential election.  Donald Trump’s victory altered that course as the markets react to potential changes in global trade.  Within the past two days, S&P 500 moves towards it’s 52-week high (2,193.81) and the FTSE Emerging Index declined by 5% from its record high from Sept. 8th (467.34) .  Although it may be too early to forecast trends in the Emerging Markets vs U.S. Large Caps, investors[...]

  • About Last Night

    About Last Night

    So I spent the evening and early part of this morning watching different networks while watching the financial markets at the same time.  The chart below is a 5-minute chart showing the S&P 500 and VIX futures trading during the non-US hours trading session.  Then after 3 hours of sleep I taught my class at Loyola, spending half of that talking my students down from their disappointment at the election results.   There were a couple of things that stand out on the chart from[...]