Trader Talk Archives - CBOE Blogs

  • Trader Talk | French Election | Mar 22, 2017, 6:13 PM

    Bearish SPX Spread Trade May Be Targeting French Election Volatility

    I spent the day with my academic hat on at Ohio University in Athens discussing all things VIX, SPX, and RUT along with answering some questions about the Social Media indexes that are quoted by CBOE.  There were also some questions about the French Election and the potential impact on the US markets.  I noted that VSTOXX futures have been elevated in anticipation of the French election, but that there wasn’t too much going on in the US, yet.  Yet is the key word because as I[...]

  • Weekend Review of VIX Options and Futures - 3/13 - 3/17

    We got a pretty orderly shift down in the VIX curve last week as the market easily digested a rate hike by the FOMC.  Also, the March premium to spot VIX at about 0.50 is pretty narrow, however the April premium remains a bit wide based on pending events in Europe.  We have been paying attention to the VSTOXX term structure due to market concerns about the pending French election.  It appears the Dutch results pushed spot VSTOXX lower, in fact the reaction was the biggest one day[...]

  • Harnessing Twitter Sentiment and the Volatility Risk Premium – Events in NYC on March 28th and in Chicago on April 5th

    At the 33rd Annual CBOE Risk Management Conference in California last week, several speakers discussed ways to use sentiment analysis and the volatility risk premium in their quest to add alpha and enhance the risk-adjusted returns of their portfolios. I am pleased to report that two upcoming events will provide more details and analysis of the topics of developing investable and actionable intelligence from analysis of sentiment trends on social media, and generating attractive risk-adjusted returns[...]

  • Technical Analysis & Charts | VIX | Trader Talk | Trade Ideas | Mar 12, 2017, 2:04 PM

    Weekend Review of Volatility Indexes and ETPs - 3/6 - 3/10

    The short end of the VXST – VIX – VXV – VXMT curve moved up while the longer end hardly budged.  TYVIX is at 2017 lows going into FOMC week, but it appears equity volatility may be pricing in some uncertainty in front of this week’s Fed decision.  Needless to say and already mentioned, VXST is the big attention getter on the table below with a 24% gain last week.  The Ten-Year futures dropped more in front of higher rates, but note that TYVIX, which closed[...]

  • Technical Analysis & Charts | VIX | Trader Talk | Trade Ideas | Mar 12, 2017, 11:40 AM

    Weekend Review of VIX Options and Futures - 3/6 - 3/10

    VIX was higher and all VIX futures were lower last week.  We have been in a pretty steep state of contango which flattened a bit.  However, there are expectations that April will remain elevated due to market conditions in Europe.  This will be explained a little more below. The VSTOXX term structure appears below and note the elevated April futures contract price relative to the spot index (it’s impossible to miss).  This shape has been around for a while now and we’ll[...]

  • Technical Analysis & Charts | VIX | Trader Talk | Trade Ideas | Mar 12, 2017, 10:47 AM

    Weekend Review of Russell 2000 Options and Volatility - 3/6 - 3/10

    Last week small cap stocks took it on the chin with the Russell 2000 (RUT) dropping about 2.5% while the Russell 1000 (RUI) actually gained about 0.7%.  The divergence between the two widened to over 5% with RUI in the lead for 2017.  VIX gained a bit last week which narrowed the gap between the CBOE Russell 2000 Volatility Index (RVX) and VIX to around 40%.  This is low by 2017 standards, but still pretty high relative to the long-term history of these two indexes.  The[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Mar 6, 2017, 3:37 PM

    Tales from the Cross VIX Highway

    While traders of nothing but the Essenpee would find themselves sitting on a gain of 1.5% to nearly 2% from February 14th through today (or through Friday, March 3rd's closing price, thus the difference between quotes), traders like me who favor TVIX or UVXY would be sitting right where they started, whether short or long. See chart below for a short history of UVXY over the last nearly-three-weeks. My account performance shows a gain of several percent. How did I do that, when trading nothing[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Mar 5, 2017, 8:08 AM

    Weekend Review of Volatility Indexes and ETPs - 2/27/2017 - 3/3/2017

    Textbook and parallel are two terms that come to mind to described the shift in the VXST – VIX – VXV – VXMT curve below.  Also, steep comes to mind as the longer dated indexes are pretty elevated when compared to VIX and VXST. The long funds below benefited from volatility increasing a bit on Tuesday last week, with VIX even putting in a 2017 high, before resuming their downward trajectory.  Note TYVIX giving up 10% which puts the volatility of 10-Year Treasury Note options[...]

  • Trader Talk | Trade Ideas | Mar 3, 2017, 9:47 AM

    Block Trade Analysis - Huge Bullish EEM Spread Trade

    Early Friday a huge spread trade was executed at CBOE using options on the iShares MSCI Emerging Market Index ETF (EEM).   Just a few minutes into the day a trader bought 66,000 EEM Mar 38 Calls at 0.62, sold 132,000 (twice as many) EEM Mar 39 Calls for 0.18 and then took in a little more premium by selling 66,000 EEM Mar 37 Puts for 0.19.  The net result was a cost of 0.07 for each short 1 37 Put, long 1 38 Call, short 2 39 Calls spreads.  The payoff at expiration on March 17th[...]

  • Market News | Trader Talk | Feb 25, 2017, 5:22 PM

    Update on The Warren Buffett Put Trades

    A few years ago, I was asked to co-author the study guide that accompanies the 3rd version of The Warren Buffett Way.  While doing research for this project I came across a discussion of a handful of index put options that Berkshire Hathaway had sold between 2004 and 2008.  Every year when the Berkshire Hathaway annual report comes out, I dig in to see how these trades are doing.  Here’s the update as of the end of 2016. Back in 2008, as the financial world was falling apart,[...]

  • Trader Talk | Trade Ideas | Feb 25, 2017, 2:54 PM

    Weekend Review of Russell 2000 Options and Volatility - 2/21 - 2/24

    Large cap dominance continues as the Russell 1000 (RUI) gained 0.77% last week and the Russell 2000 (RUT) was down 0.38%.  For the year RUI is now outpacing by over 3%. Small cap risk remains high relative to large cap risk as the CBOE Russell 2000 (RVX) premium to VIX remains are elevated levels.  First thing Friday, with RUT under a bit of pressure down about 10 points around 1383 one trader came in with a bull put spread that has a ton of room for error.  They sold the RUT Apr[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Feb 25, 2017, 2:14 PM

    Weekend Review of Volatility Indexes and ETPs - 2/21 - 2/24

    VIX was the only S&P 500 related volatility index that lost value last week.  VXST rose, probably getting a boost from coming off a long weekend.  The longer dated volatility indexes mirrored the action in longer dated VIX futures by moving to the upside.  April seems to be the next month of concern among volatility players with the pending election in France.  Other pockets of volatility are showing up in the table below.  SKEW finished the week near recent highs and[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Feb 25, 2017, 10:46 AM

    Weekend Review of VIX Futures and Options - 2/21 - 2/24

    To say that volatility was flat last week is misstating the facts.  Sure, VIX was lower, but wow, look at the rest of the curve.   All contracts were higher with April and May futures leading the way at up over 6%.  For this we will blame France, which I will explain after the VIX Table / Term Structure below. VSTOXX is basically VIX for the European markets.  Specifically, it is an index that calculates a consistent measure of implied volatility as indicated by options[...]

  • What's Trading Today - OTM RUT Bull Put Spread

    Today’s What’s Trading focused on a Bull Put Spread using Russell 2000 (RUT) quarter end options expiring on March 31st. For 2017, as of mid-morning today, the S&P 500 (SPX) is up about 3% more than RUT, which is a reversal of year end price action that saw small cap stocks as represented by RUT out performance the SPX by over 10% from election day to December 31st.  Note the elevated level of RUT implied volatility of RUT options as represented by the CBOE Russell[...]

  • VIX | Trader Talk | Trade Ideas | Feb 20, 2017, 7:30 PM

    Weekend Review of Volatility Indexes and ETPs - 2/13 - 2/17

    VXST and VIX managed gains last week while the longer dated volatility indexes (VXV and VXMT) both lost value.  The curve created by charting out VXST, VIX, VXV, and VXMT has been steep for most of 2017 as the shorter dated indexes have been at very low levels.  The price action last week narrowed the angle to more normal levels.  Last week the S&P 500 was up just over 1.5% and VIX rose over 5%.  More on that after the table below.  I ran some numbers and this is[...]