• Market News | VIX | Trader Talk | Sep 10, 2015, 11:00 AM

    Earnings Next Week - 9/14 - 9/18

    Earnings Next Week - 9/14 - 9/18

    We are still between earnings seasons so there are only a few companies reporting next week. As always the table below represents the last 12 quarters of post earnings stock price reactions.

  • The Week in Russell 2000 Trading - 8/31 - 9/4

    The Week in Russell 2000 Trading - 8/31 - 9/4

    The Russell 1000 (RUI) was down 3.31% last week and the Russell 2000 (RUT) lost 2.3%.  This outperformance (I know it doesn’t feel like outperformance) of small caps leads me to ponder the true concerns of market participants that actually put money to work.  The press continues to focus on the Fed’s next move, which will be known in just under two weeks on September 17th.  However, small cap stocks, as a group, are more exposed to the domestic economy than large cap stocks. [...]

  • Market News | VIX | Trader Talk | Futures | Sep 5, 2015, 3:44 PM

    The Week in VIX - 8/31 - 9/4

    The Week in VIX - 8/31 - 9/4

    On the traditional VIX curve we saw a pretty dramatic shift of the upside across the board.  The exception was spot VIX, but we have to attribute the smaller move to the three day weekend effect that causes VIX to close a little lower than if we were approaching a 2 day weekend.  A couple of things catch my eye on the term structure chart below. First, the price difference between September and October has me scratching my head.  On Friday we kept hearing how the employment number[...]

  • Market News | VIX | Trader Talk | Education | Futures | Trade Ideas | Sep 5, 2015, 11:00 AM

    The Week in Volatility Indexes and ETPs - 8/31 - 9/4

    The Week in Volatility Indexes and ETPs - 8/31 - 9/4

    The S&P 500 lost 3.4% last week which I guess is becoming commonplace these days.  Do note on the curve below that VXST closed a tad lower on a week over week basis.  We attribute this to the long weekend we are currently experiencing and I’ll address that a little more in a minute. Both VXST and VIX experience a little bit of a headwind going into long weekends.  This can be attributed to the calculations of both being based on calendar days and not trading days. [...]

  • Market News | VIX | Trader Talk | Education | Sep 3, 2015, 3:17 PM

    Block Trade - RUT Bull Put Spread That's More Like Just Shorting a Put

    Block Trade - RUT Bull Put Spread That's More Like Just Shorting a Put

    Before getting to the trade, indulge me for a second while I show the value of selling puts in a broad based market index... The CBOE S&P 500 PutWrite Index (PUT) is an excellent depiction of the benefits of selling puts.  The chart below shows the performance of PUT versus the total return for the S&P 500 from January 1990 through the end of August 2015.  Both returns are displayed assuming $100 was invested at the beginning of 1990.  Note over time PUT outperforms[...]

  • Market News | VIX | Trader Talk | Futures | Sep 1, 2015, 4:04 PM

    May the Next Voice You Hear Be Your Own

    May the Next Voice You Hear Be Your Own

    Con·trar·i·an Noun A person who takes an opposing view. One who rejects the majority opinion as in economic matters. What an emotional business this is. The uneasy market sell-off continued today with option implied volatility climbing higher. Radio and TV experts have no problem pumping fear into the average investor’s head. Fright sells. RIP Wes Craven. New traders make the big mistake of watching and listening for every clue to help them place the perfect trade. Only to fill[...]

  • VIX | Trader Talk | Trade Ideas | Aug 31, 2015, 6:24 PM

    Easy Trading Before the Hurricane Came Through

    Easy Trading Before the Hurricane Came Through

    As someone pointed out two posts back, I did tell everyone: "Follow along for a less wordy (because I've already explained it all) installation documenting the conclusion to this story pretty soon, as the story must end before the dates stamped on my only two current positions: Friday the 21st." So here it is, minus lots of words, because there's not a ton to say other than when I opened, when I closed, and the prices (and the way I dodged being assigned a lot of shares at the associated[...]

  • Market News | VIX | Trader Talk | Futures | Aug 30, 2015, 11:41 AM

    The History of VIX Contango and Backwardation

    The History of VIX Contango and Backwardation

    This morning (Sunday) I got a request from Eric Thompson at Thompson Capital Management to look into streaks of backwardation in VIX.  There are different ways to measure backwardation.  You will hear pundits say we are in backwardation whenever VIX closes higher than the front month future.  Most market participants like to look to the relationship between the first and second month future since that relationship has a direct impact on the volatility oriented exchange traded products[...]

  • Market News | VIX | Trader Talk | Futures | Aug 30, 2015, 9:40 AM

    The Week in Russell 2000 Trading - 8/24 - 8/28

    The Week in Russell 2000 Trading - 8/24 - 8/28

    Once a month I leave CBOE for a couple of days and turn into a student attending a residency at Oklahoma State.  I do my very best to leave the markets behind and focus on my studies.  I did a pretty good job of tuning out what was going on toward the end of the week.  This resulted in me being surprised that the Russell 1000 (RUI) gained almost 1% on a week over week basis with the Russell 2000 rising just over a half of a percent.  Both are lower on the year, with large[...]

  • Market News | VIX | Trader Talk | Futures | Strategy | Trade Ideas | Aug 29, 2015, 1:19 PM

    The Week in VIX - 8/24 - 8/28

    The Week in VIX - 8/24 - 8/28

    I’m depending on my aging mental capacity in lieu of spending the time to go through the last four years of VIX recap blogs for the following statement.  I have no recollection of a shift in the VIX term structure curve that replicates what shows up below.  VIX lost value on the week, while all the futures contracts moved higher.  Last Friday, spot VIX ran up quickly at the end of the day, but the futures remained at lower levels.  To get back to a more ‘normal’[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Aug 29, 2015, 7:55 AM

    The Week in Volatility Indexes and ETPs - 8/24 - 8/28

    The Week in Volatility Indexes and ETPs - 8/24 - 8/28

    Under no circumstances does the week over week change in the VXST – VIX – VXV – VXMT curve tell the story of last week.  There’s something worth noting, but last week is not done any justice at all if a line showing Monday closing prices is not included, therefore it is. What strikes me as noteworthy about the week over week change in something that is very subtle on the term structure chart that appears above.  Note that VXV and VXMT actually rose last[...]

  • Market News | VIX | Aug 28, 2015, 3:00 PM

    The Weekly Options News Roundup – 8/28/2015

    The Weekly Options News Roundup – 8/28/2015

    The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast and online and social media outlets. VIX: Word on the Street Markets have experienced a tumultuous week, to say the least.  Triple digit swings in the Dow and S&P caused the CBOE Volatility Indexâ (VIXâ Index) to catapult above 50 – a level not seen seven years – on Monday, before retreating to the mid-20s today.  Is[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Aug 27, 2015, 9:51 AM

    Return of the Big VIX Trade

    Return of the Big VIX Trade

    Beginning back in the spring there was a very large 1 x 2 VIX Call spread that was rolled from month to month for several months.  With the excess volatility it appears the trade was exited earlier this week.  But that is apparently not the end of the story…. Yesterday there was a buyer of about 92,000 VIX Oct 15 Calls for 8.00 who sold about 184,000 VIX Oct 21 Calls at 4.80 which boils down to a credit of 1.60 per spread.  The payoff, if held to October expiration, appears below[...]

  • Market News | VIX | Trader Talk | Strategy | Aug 25, 2015, 6:21 PM

    Trade in Which I Get a Black Eye, but Escape a Worse Black Eye

    Trade in Which I Get a Black Eye, but Escape a Worse Black Eye

    It was a black eye I gave myself, of course.  If this blog were all sunshine and lollipops - well, that would be great.  I'll work on it.  For now, it's not happening. So last week I got it into my head to sell some UVXY 55 calls, thinking that strike was unlikely to hit.  Under "normal" market conditions, that would be a reasonable belief.  As everyone and their kid's kindergarten teacher knows by now, the market has had a "correction."  I got sent[...]

  • Market News | VIX | Trader Talk | Futures | Aug 24, 2015, 8:20 PM

    VIX and Volatility Markets Today - 8/24/2015

    VIX and Volatility Markets Today - 8/24/2015

    First, a quick discussion of the VIX quotes from early today.  Just as the equity market opened the S&P 500 E-mini futures went limit down.  Market makers in the SPX pit at CBOE use the futures for hedging purposes so it was difficult for the traders in the pit to asses where the equity market was going and this created a pause is quoting.  Following the limit down situation there was spotty quoting in SPX and SPXW options so VIX values were not being disseminated.  The VIX[...]