Trader Talk Archives - Cboe Blogs

  • Market News | Trader Talk | Strategy | Apr 25, 2016, 12:44 PM

    A Buffett Put Trade Refresher

    A Buffett Put Trade Refresher

    It's been a while since I first wrote about Berkshire Hathaway selling put options on broad based indexes.  The following is a refresher or introduction to the trade if this is new to you. Back in 2008, as the financial world was falling apart, the business media loved to quote Warren Buffett’s comment about derivatives from Berkshire Hathaway’s 2002 annual letter. However, that line has been taken completely out of context to fit the needs of market commentators or derivative critics.[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Apr 24, 2016, 7:05 PM

    Weekend Review - VIX Options and Futures - 4/18 - 4/22

    Weekend Review - VIX Options and Futures - 4/18 - 4/22

    VIX moved down and the curve shifted lower as well. This sort of comment had been leading off this blog more often than not for years. I’m just surprised I’m saying it during what was expected to be a transitional year from a low to high volatility regime. The only bearish feature below is how steep the curve is. A few more weeks in the 13’s and we’ll probably see a flattening of the curve. Late last week it was pointed out to me that the VIX had closed under[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Apr 24, 2016, 3:44 PM

    Weekend Review - Volatility Indexes and ETPs - 4/18 - 4/22

    Weekend Review - Volatility Indexes and ETPs - 4/18 - 4/22

    Very quiet weeks, like last week, usually result in a slight shift lower in the VXST – VIX – VXV – VXMT curve. Contango persists and it worked its magic on SVXY, VXX, and UVXY last week. SVXY had a good week rising over 5% while VXX gave up just about the same amount and UVXY lost over 11%. Note VVIX is remaining at relatively high levels as is SKEW.   For the year SVXY is up about 7%, VXX has lost 21% and UVXY is down 45% (after being up over 100% back in February). SVXY[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Apr 24, 2016, 2:26 PM

    Weekend Review - Russell 2000 Index and Volatility - 4/18 - 4/22

    Weekend Review - Russell 2000 Index and Volatility - 4/18 - 4/22

    For the first time in 2016 the Russell 2000 (RUT) moved into positive territory last week. A gain of 1.4% places RUT just under 1% in the green for the year. Small caps also closed the gap with large cap stocks as the Russell 1000 (RUI) was up by 0.60% and is less than 1.5% higher than RUT for the year. Despite the run in small caps, the CBOE Russell 2000 Volatility Index remained relatively high compared to VIX last week. I take this as being an indication that there are not a[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Apr 19, 2016, 12:55 PM

    Huge 1 x 2 VIX Call Spread Rolled Today

    Huge 1 x 2 VIX Call Spread Rolled Today

    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[...]

  • Market News | Technical Analysis & Charts | VIX | Trader Talk | Apr 18, 2016, 11:52 AM

    Checking in on Overnight VIX Action

    Checking in on Overnight VIX Action

    Last Friday CBOE began disseminating spot VIX quotes during what we lovingly call the Extended Hours Session (ETH). The first quote for VIX on April 15th occurred at 2:15 am Chicago time. I was elsewhere Friday but I did check the data periodically and everything seemed to be running smoothly. I’m back at work today so I decided to take a look at how VIX did relative to the S&P 500 futures market from 2:15 am to 8:15 am Chicago time, looking at the price every 5 minutes. At 8:15 am the[...]

  • Weekend Review - Volatility Indexes and ETPs - 4/11 - 4/15

    Weekend Review - Volatility Indexes and ETPs - 4/11 - 4/15

    The S&P 500 was up by 1.62% last week and the VXST – VIX – VXV – VXMT curve reacted accordingly shifting lower in a fairly parallel fashion. The steepness has me concerned about the second half of this year, but for now things look just peachy. Note on the table below that despite (or maybe because of) the drop in VIX, VVIX rose a tad. It could be traders used to the weakness in VIX and related futures to get long volatility through VIX calls. It is a bit surprising[...]

  • Weekend Review - Russell 2000 Options and Volatility - 4/11 - 4/15

    Weekend Review - Russell 2000 Options and Volatility - 4/11 - 4/15

    One of my favorite books when I was a wee lad was “The Little Engine That Could”. When I see the Russell 2000 (RUT) coming very close to going from red to green on the year that story pops in my mind as I personify RUT saying, “I think I can” with the small cap benchmark approaching unchanged on the year. Last week RUT was up by 3% which places the index just 44 basis points in the red for 2016. Pretty impressive for an index that was down as much as 16% on the year.[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Apr 10, 2016, 7:51 AM

    Weekend Review - VIX Futures and Options - 4/4 - 4/8

    Weekend Review - VIX Futures and Options - 4/4 - 4/8

    A week ago Thursday I was in Arizona speaking to an investment club and was asked if VIX would hit the 12’s anytime soon. I said I didn’t think so and the following day VIX came within a penny of a 12 handle. This week I was spared a trip to the wall of shame as VIX worked 17% higher to finish at 15.36. The futures were at a nice premium before this week so the front month April contract, which expires on the open April 20th, rose only 8% as the curve flattened slightly after spending[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Apr 9, 2016, 3:15 PM

    Weekend Review - Volatility Indexes and ETPs - 4/4 - 4/8

    Weekend Review - Volatility Indexes and ETPs - 4/4 - 4/8

    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[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Apr 9, 2016, 8:30 AM

    Weekend Review - Russell 2000 Options and Volatility - 4/4 - 4/8

    Weekend Review - Russell 2000 Options and Volatility - 4/4 - 4/8

    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[...]

  • Market News | Trader Talk | Trade Ideas | Apr 7, 2016, 8:45 AM

    Earnings Next Week - 4/11 - 4/15

    Earnings Next Week - 4/11 - 4/15

    Just like the beginning of baseball season witnesses a few games before we have days of a full slate of games, earnings season kicks off next week with just a dozen stocks that have short dated options available for trading reporting their numbers.  As always, 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.

  • Trader Talk | CBOE Memories | Apr 6, 2016, 11:05 AM

    Trading Lessons: The Mountain Top Is Lonely

    Trading Lessons:  The Mountain Top Is Lonely

    This story is part III of my trading lessons series. I've been to the top of what is called 'trading nirvana', a place where I thought I would have plenty of company. Back in my early trading days, I thought there was nothing bad that could touch me. As you recall from a previous article where I turned a small sum of 7K into a nice amount over half a million in just a few years. This was 'it' for me, and while it was far from a fortune I could live on the rest of my days, I certainly believed it[...]

  • Trader Talk | Trade Ideas | Apr 4, 2016, 1:35 PM

    Earnings This Week - 4/4 - 4/8

    Earnings This Week - 4/4 - 4/8

    This will be the last quiet earnings week for about a month.  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.  

  • Market News | VIX | Trader Talk | Education | Futures | Trade Ideas | Apr 3, 2016, 11:11 AM

    Weekend Review - VIX Options and Futures - 3/28 - 4/1

    Weekend Review - VIX Options and Futures - 3/28 - 4/1

    VIX closed on the 2016 lows last week and flirted with a 12 handle. I was asked at a seminar in Scottsdale, AZ on Thursday night how long it will take for VIX to touch 12. I responded that I had a hard time seeing a 12 handle this year. It won’t take much for me to be proven wrong. Something that keeps me in the higher volatility regime camp is the relative level of VIX futures to spot VIX. Note below that the April futures are at a hefty premium to spot VIX despite getting the monthly employment[...]