• Market News | Trader Talk | Strategy | Trade Ideas | Jun 30, 2015, 3:15 PM

    Bullish EEM Trade from Monday

    Bullish EEM Trade from Monday

    As CBOE expands the number of markets available for trading to include foreign indexes we are going to do the same in this space every Tuesday through taking a look at derivatives based on the MSCI family of indexes.  With the weakness in global markets on Monday I decided to search around for a trade in EEM ETF options that may be trying to take the other side of low equity prices. The daily chart below shows that EEM was down about 2.4% which was a bit more than the drop in[...]

  • Market News | VIX | Trader Talk | Futures | Strategy | Jun 29, 2015, 5:52 PM

    Today in VIX, SPX, and RUT - 6/29/2015

    Today in VIX, SPX, and RUT - 6/29/2015

    A lot went on today as the Greece thing seemed to come to a head. Below are some highlights with respect to the CBOE Volatility Index, the S&P 500, and the Russell 2000 with respect to the reaction of global markets to the news out of Greece. Spot VIX rose just over 34% and the front month July futures contract was up almost 20%. Volume in VIX futures appears to have topped 400,000 for the first time this year. July and August settled within a tick of each other which is a positive for the long[...]

  • Market News | VIX | Trader Talk | Jun 29, 2015, 5:08 PM

    Five Volatility Indexes Rose More Than 30% Today, As Worldwide Stocks and Oil Prices Fell on News Out of Greece

    Five Volatility Indexes Rose More Than 30% Today, As Worldwide Stocks and Oil Prices Fell on News Out of Greece

    In the past couple of days, news out of Greece regarding capital capital controls and bank closings had a worldwide negative impact on stock and oil prices, while five of CBOE’s volatility indexes rose more than 30%, and volume in VIX futures soared to an estimated 415,000 contracts. After news about the closures of Greek banks broke over the weekend, VIX futures volume in the 5 pm (Sunday) to 2 am CT session was a record 32,617 (estimated) contracts, an all-time record for that time period. Investors[...]

  • Market News | VIX | Trader Talk | Education | Jun 28, 2015, 10:59 AM

    The Week in Russell 2000 Trading - 6/22 - 6/26

    The Week in Russell 2000 Trading - 6/22 - 6/26

    Both indexes were lower last week, but the Russell 2000 (RUT) slightly outperformed the Russell 1000 (RUI) and continued to maintain a wide performance gap for 2015. The chart below indexes both the RUT and RUI to 100 as of the last day of 2014 to get an apples to apples visual of their respective performance. As of Friday RUT was up 6.23% while RUI has gained 2.58% this year. The CBOE Russell 2000 Volatility Index (RVX) was down 0.05 for the week finishing at 16.18 while the CBOE Volatility[...]

  • Market News | VIX | Trader Talk | Futures | Jun 27, 2015, 9:41 AM

    The Week in Volatility Indexes and ETPs - 6/22 - 6/26

    The Week in Volatility Indexes and ETPs - 6/22 - 6/26

    VIX rose less than one half one percent last week as the S&P 500 was down slightly. I would normally say there was not much change in risk perception for the broad US stock market, but that seems to be only true at the 30-day time horizon.   Note the VXST – VIX – VXV – VXMT term structure chart below shows a rise in VXST (9-day), but also a drop in VXV (3-month) and VXMT (6-month) last week. It may just be that despite the continued pushing out of the problems related[...]

  • Market News | VIX | Trader Talk | Strategy | Jun 25, 2015, 11:25 AM

    Block Trades - One Bullish and One Bearish VIX Option Trade

    Block Trades - One Bullish and One Bearish VIX Option Trade

    When I disagree with someone with respect to an outlook for the market or particular stock I with often use the phrase, “that’s what makes a market”. What I mean by that is it takes people with differing opinions to create a viable and tradeable market. As I was looking at the trading activity in the VIX option arena earlier this week I can across one bullish and one somewhat bearish trade that occurred on the same day. First I’ll take a quick look at the bullish trade. Early[...]

  • Market News | Trader Talk | Jun 23, 2015, 4:06 PM

    This Friday Completes the 2015 Russell Reconstitution Process

    This Friday Completes the 2015 Russell Reconstitution Process

    The last Friday of June means different things to different people. When I was growing up, that was the day before the Rhoads family embarked on their annual vacation to the Florida Gulf Coast. Now that I’m all grown up (which may be debatable at times) and spend most of my time focusing on the financial markets, the last Friday in June represents the annual restructuring of the Russell family of indexes. This process is commonly referred to as the Russell Reconstitution. A couple of weeks[...]

  • Market News | VIX | Trader Talk | Futures | Jun 20, 2015, 12:37 PM

    The Week in VIX - 6/15 - 6/19

    The Week in VIX - 6/15 - 6/19

    I promise there are two curves on the figure below showing the week over week changes for VIX and the active VIX futures contracts. All were higher with the exception of the December contract which finished the week unchanged. This just increased the ‘divot’ that we see each year with December volatility. Trading wise, someone used the Thursday dip in VIX to take a bullish position on volatility using July VIX Options. This trade took the form of buying the VIX Jul 17 Call for 1.10 and[...]

  • Market News | VIX | Trader Talk | Futures | Strategy | Jun 18, 2015, 10:50 AM

    Block Trade Analysis - Short VIX Straddle + Long OTM Call

    Block Trade Analysis - Short VIX Straddle + Long OTM Call

    The June 2015 VIX futures and options met their demise on the open yesterday with settlement coming in at 14.67. One trader moved on to the following month with a trade structure that is unique in the option world, but pretty common in VIX world. Mid-morning on Wednesday a trader sold 22,800 VIX Jul 15 Calls for 1.73 and 22,800 VIX Jul 15 Puts at 1.18 who then completed the trade through purchasing 22,800 VIX Jul 22 Calls at 0.72 for a net credit of 2.19. The payoff at expiration appears below with[...]

  • Market News | Trader Talk | Futures | Jun 16, 2015, 7:14 PM

    2015 Russell Reconstitution Update

    2015 Russell Reconstitution Update

    Each June the Russell family of equity indexes are adjusted to reflect changes in the markets.  This annual process is commonly referred to as the Russell Reconstitution.   The Reconstitution occurs once a year in order to keep the cost associated with maintaining an index portfolio at a minimum or specifically to keep trading costs low. We are now half way through the Russell Reconstitution with two of the four steps behind us.  The almost month long process begins on the last[...]

  • Market News | Trader Talk | Strategy | Trade Ideas | Jun 11, 2015, 4:17 PM

    Earnings Next Week - 6/15 - 6/19

    Earnings Next Week - 6/15 - 6/19

    We are starting to emerge from the softest part of the earnings calendar and actually have three times as many stocks with short dated options reporting next week versus this past week.  Of course there was only one this week (LULU). The numbers on the table represent three years of history with Max being the biggest gain, Min being the biggest drop, Abs Avg representing the average move (higher or lower), and Last Q being what the stock did in reaction to earnings three months ago.     [...]

  • Market News | VIX | Trader Talk | Education | Trade Ideas | Jun 11, 2015, 2:00 PM

    The Big $VIX Trade - Part 3

    The Big $VIX Trade - Part 3

    The title of this blog refers to three parts and this is because we just had the third trade in the ongoing saga of a large 1 x 2 call spread in VIX options come into the VIX option pit yesterday.  There is actually another piece to the puzzle as when the first trade was initiated part of the transaction involved a large sale of call options and that position may still be open.  I do my best to keep blogs short, but I’m going to run through all three transactions individually and[...]

  • VIX | Blogging Options | Trader Talk | Jun 10, 2015, 12:39 PM

    CBOE Mid-Day Update 6.10.15

    CBOE Mid-Day Update 6.10.15

    Volatility as an asset class Netflix (NFLX) is recently up $35.57 to $682.60 as shares trade at a record high on UBS raising its price target to $722 from $600 citing international launches, its superior content position, solid subscriber growth and reasonable valuation. June weekly call option implied volatility is at 32, June is at 30, July is at 40, October is at 37; compared to its 52-week range of 24 to 87. Johnson Controls (JCI) is recenlty up $2.74 to $54.30 after announcing that it is exploring[...]

  • VIX | Blogging Options | Trader Talk | Jun 10, 2015, 8:44 AM

    Blogging Options: CBOE Morning Update 6.10.15

    Blogging Options:  CBOE Morning Update 6.10.15

    Volatility as an asset class Netflix (NFLX) is recently up $7.55 to $654.70 in the premarket after UBS raised its price target to $722 from $600 citing international launches, its superior content position, solid subscriber growth and reasonable valuation. June weekly call option implied volatility is at 26, June is at 27, July is at 40, October is at 37; compared to its 52-week range of 24 to 87. Tesla (TSLA) is recently down 50c to $255.50 in the premarket after announcing the retirement of CFO[...]

  • Market News | VIX | Trader Talk | Jun 9, 2015, 6:30 PM

    Russell 2000 Volatility and the Reconstitution Process

    Russell 2000 Volatility and the Reconstitution Process

    June means a lot of things to a lot of people such as kids getting out of school, finally putting away the snow blower in Chicago, or anticipating a well-deserved vacation.  For market watchers June means it is time for the Russell Reconstitution process. I spend a good amount of time focusing on market volatility, both historical and implied volatility.  Historical volatility can be obtained through a simple calculation on any financial market, whether it is a stock price, index, or even[...]