Cboe Blogs

AIG options were active into expiration. There's been speculation about their search for a new CEO as well as potential stock buyback plans. AIG beat on the top and bottom line during an earnings cycle that has generally been quite strong. They also announced a $2.5 billion repurchase plan. We take a look at the Weekly ATM straddle as well as a June OTM strangle going into and coming out of the "event". Full Video below:

Long high volatility premium? Learn how verticals reduce exposure to high or low volatility options. ALL trader succeeds in managing high volatility option purchase by offsetting position with selling high volatility out-of-the-money option.   $ALL #Allstate

We hit the busiest part of earnings season this week.  The stocks below have Weeklys available for trading and the numbers represent the last 12 quarters of one day price reactions to their announcement.  As always double check the dates as none have been confirmed.

LiveVol Pro Scanner allows me to find big trades just like this one in DVMT. DVMT has had a nice run since late last year and we got a trader who thinks this uphill climb is going to hit a slippery slope sometime this year. Implied volatility is signaling about a $10 move up or down between now and December expiration and the forecast is choosing down. Time decay is next to nothing right now but he is long .07 vega so an increase in implied volatility would be favorable. There is a significant[...]

As the dad of two upstanding children of the millennials generation, I'm excited about their future as the embark on their journey to conquer the world.  My kids turn 18 and 20 in May, and there is nobody more proud of their accomplishments than me.  My daughter is about the graduate high school with a strong GPA, works part time, has interests in politics and diplomacy along with an enormous talent in the arts (theater, song and dance).  She is off to college this fall. My son is[...]

The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX Index and volatility-related articles from print, broadcast, online and social media outlets.      CBOE Turns 44 On April 26, 1973, CBOE created the listed options industry.  911 contracts on 16 stocks changed hands on that fateful first day 44 years ago this week.   Now, with four different options markets, CBOE’s options platforms trade an average of nearly seven million contracts[...]

S&P 500 implied volatility was dramatically lower last week.  Of significance is VXV which hit 2017 lows.  I’m teamed up with an academic putting the final touches on a study showing that VXV leads VIX so this may be a signal that the low for VIX in 2017 hasn’t be established and a close below 10.00 is a distinct possibility.  Beyond the long ETPs on the table, which had a pretty tough week, are some other markets worth noting.  First, TYVIX, which was over[...]

This past week was basically a tie between small and large cap stocks as the Russell 2000 (RUT) and Russell 1000 (RUI) were both up about 1.5%.  Four months into 2017 and RUI continues to maintain a lead of about 3.3% over RUT.  Last week VIX got smashed as did the CBOE Russell 2000 Volatility Index (RVX).  A return to the low end of the range resulted in the VIX / RVX relationship returning to higher levels.   With Weeklys available for trading all kinds of alternatives that[...]

Shorting UVXY is sort of like making pancakes and flipping them in the air and catching them with the pan.  You can entertain yourself and others like that for a while, and you just may accumulate a large stack of perfectly browned piping-hot pancakes, but sooner or later some raw batter is going to hit the kitchen floor, and that is not much fun.  And what if everyone eats up all your pancakes in the meantime, and you're stuck with nothing but a kitchen-floor disaster? Well, on Thursday,[...]

Everyone knows what an ear worm is and if not you will now.  It is basically when a song is stuck in your head.  Since Monday REM’s Orange Crush has been on constant replay in my head.  VIX losing 26% and the front month down 14% definitely qualify as a volatility crush.  Since all this crushing was caused by events in Europe (France specifically) we will take a look at the week over week VSTOXX and associated futures term structure change.  Now I have Officer Barbrady[...]

Spring has arrived and our home town Chicago baseball teams (Cubs & White Sox) lead their respective Central Divisions.  Likewise the Chinese and Emerging equity markets have also taken an early lead in the global economic recovery this year. On April 18, 2017 IMF delivered their World Economic Outlook, a report which raised the global economic outlook in 2017 to 3.5% and 3.6% in 2018 citing “Stronger activity and expectations of more robust global demand…”  Their[...]

CBOE turns 44 today, and we thought we'd provide 44 "fun facts" to mark the occasion.   The first day of trading for CBOE was April 26, 1973. 911 option contracts traded on the first day in 1973. There were only 16 stocks with options on the first day. Seats at CBOE were originally offered at $10,000. Initially put options were not permitted for trading. In 1973, the Black Scholes model was published in the Journal of Political Economy. In 1977 CBOE was permitted[...]

I have a handful of former Options Institute students who like to keep me up on their trading.  Yesterday morning I got an email from one who decided to take the other side of the big move to the upside in the S&P 500 (SPX).  Just after the market open, when the SPX was at 2374, the trader sold the SPX Apr 24th 2370 Call for 6.40 and purchased the SPX Apr 24th 2380 Call for 1.45 and a net credit of 4.95.  These options are Monday Weeklys and they expired on the close yesterday. [...]

Today I came across an Iron Condor initiated using MCD options expiring Friday and in anticipation of tomorrow morning's earnings announcement.  Click on the image to watch today's episode and then read below for some more color on this neutral earnings play. The colorful payout diagram below notes the short strikes were 3.5% higher and 3.9% lower than where MCD was trading.  The average move for MCD stock is up or down just over 2% in reaction to earnings (based on the last 12 quarters). [...]

Small caps had a good week last week as the Russell 2000 (RUT) rose about 2.5% which places it up 1.67% for the year.  The large cap focused Russell 1000 (RUI) was up just under 1% and is not up 4.96% for 2017. VIX has worked higher as geopolitical risks have risen in the past couple of weeks and the Russell 2000 Volatility Index (RVX) has done the same.   The result is a lower RVX to VIX risk premium, with this measure actually closing at a 2017 low on Friday.   On Friday there[...]