• Market News | VIX | Trader Talk | Trade Ideas | Jan 21, 2016, 7:28 AM

    VIX Backwardation Streak Updates

    VIX Backwardation Streak Updates

    Despite a late day recovery for the equity markets, all three measures of backwardation remained in place as of yesterday (1/20). The new front month is February.  VIX closed at 27.59 and the February VIX futures settlement came in at 24.725.  This is the 10th day in a row that VIX has closed higher than the front month future. The relationship between the front month and second month is most important to traders focused on the VIX related ETPs (VXX, SVXY, UVXY, etc) and the front month[...]

  • Weekly Review - Russell 2000 Index and Volatility 1/11 - 1/15

    Weekly Review - Russell 2000 Index and Volatility 1/11 - 1/15

    The Chicago Bears are doing the same thing the rest of us did this weekend, watching the playoffs from home.  However, the stock market bears have been dominate in 2016.  Russell 2000 (RUT) history goes back to 1987 so there is not a lot to work with, but the first ten days of 2016 are the worst first ten days on record for RUT.  The table below shows the first ten days for every year when RUT started off in the red followed by what the small cap oriented index did for the balance[...]

  • Trader Talk | Trade Ideas | Jan 13, 2016, 6:34 PM

    Earnings Week of 1/19 - 1/22

    Earnings Week of 1/19 - 1/22

    It is a holiday shortened week next week, but there's plenty going on in the world of earnings as we start to move into the heavier part of earnings season.  The numbers below represent three years of history with one exception (SYF) which hasn't been around long enough to provide a full 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 | Trade Ideas | Jan 11, 2016, 6:19 PM

    Block Trade Analysis - Huge 1 x 2 Jan VIX Call Spread from Monday

    Block Trade Analysis - Huge 1 x 2 Jan VIX Call Spread from Monday

    Today, while I was teaching at the Options Institute, a roar came up from the VIX pit about an hour into the trading day.  Despite the tumultuous market activity that we have experienced to begin the year, the audible volume from the open outcry pits has been fairly tame.  What got the guys going today was a very large ratio spread using January VIX Calls that expire on the open next Wednesday. The specific trade sold well over 100,000 of the 22 Calls and purchased twice as many of the[...]

  • Market News | VIX | Trader Talk | Strategy | Trade Ideas | Jan 5, 2016, 8:22 AM

    Block Trade Analysis - VXX Bearish and Bullish Trades from Monday

    Block Trade Analysis - VXX Bearish and Bullish Trades from Monday

    Days like yesterday get me searching for volatility oriented option trades.  I found two that caught my eye in the VXX option market and debated which one to discuss in this space.  After about three seconds of internal debate I decided to just talk about both. Both trades occurred in the middle of the day yesterday, one is bearish on VXX while the other benenfits if VXX spikes to the upper 20’s.  First the bearish trade. When VXX was at 21.90 there was a seller of the VXX Jan[...]

  • Market News | Trade Ideas | Jan 4, 2016, 4:48 PM

    Earnings Week of 1/4 - 1/8

    Earnings Week of 1/4 - 1/8

    The markets are well rested and ready for earnings announcements to start rolling out.  This week the calendar is light with three companies reporting that also have short dated options available for trading.  The numbers below represent three years of stock price reaction history to earnings announcements with the biggest gain, biggest drop, average move (non-directional) and stock price reaction last quarter.

  • Market News | VIX | Trader Talk | Education | Strategy | Trade Ideas | Dec 20, 2015, 3:30 PM

    Weekly Review - Russell 2000 Options and Volatility - 12/14 - 12/18

    Weekly Review - Russell 2000 Options and Volatility - 12/14 - 12/18

    Small cap stocks continue to languish relative to large cap stocks for 2015.  The Russell 2000 (RUT) was down 0.23% while the Russell 1000 (RUI) lost 0.35% last week.  RUT is down 6.95% for 2015 while the large cap oriented RUI is down only 2.94%.  It’s going to take a small miracle for RUT to close the gap over the next two holiday shortened weeks. The CBOE Russell 2000 Volatility Index (RVX) rebounded relative to VIX last week but finished very close to parity. [...]

  • Market News | VIX | Trader Talk | Education | Futures | Trade Ideas | Dec 20, 2015, 10:44 AM

    Weekly Review - VIX Futures and Options - 12/14 - 12/18

    Weekly Review - VIX Futures and Options - 12/14 - 12/18

    VIX gave up 15% last week, despite the S&P 500 losing a little and this index trading in a range of greater than 80 points for the second consecutive week.  Consensus thinking is that with the Fed finally hiking rates a little uncertainty came out of the markets.  Of course Janet Yellen’s press conference was still in full swing when market pundits started discussing when the next potential rate hike may occur. The curve depicting the short dated VIX futures contracts[...]

  • VIX | Trader Talk | Education | Futures | Trade Ideas | Dec 19, 2015, 9:46 AM

    Weekly Review - Volatility Indexes and ETPs - 12/14 - 12/18

    Weekly Review - Volatility Indexes and ETPs - 12/14 - 12/18

    Finally, the Fed raised rates.  I’m reading Ben Bernanke’s book and it is interesting that this was being debated when he was still the chairman.  The equity market loved it and then hated it with the result being a roller coaster of a week.  The VXST – VIX – VXV – VXMT curve was on heightened alert this time last week and returned to normal to end the week.  It is rare, but we seem to have experienced an earnings like volatility crush in SPX volatility[...]

  • Market News | Trade Ideas | Dec 14, 2015, 4:59 PM

    Earnings Previews - 12/15 - 12/22

    Earnings Previews - 12/15 - 12/22

    I've been remiss at keeping up with earnings and will use a brutal travel schedule as my excuse.  Since there are only two companies reporting next week I'm putting all the earnings for this week and next into a single blog.  The numbers below represent the last three years worth of earnings releases with Max being the biggest stock price rally, Min the biggest loss, Abs Avg is the average move without taking direction into account, and Last Q showing what the stock did when the company[...]

  • Strategy | Trade Ideas | Dec 11, 2015, 12:11 PM

    RUT Play into the FOMC

    RUT Play into the FOMC

    With the FOMC meeting scheduled for next Tuesday, December 15, and the announcement of a possible rate hike on 2016 on Wednesday, we are seeing inflated volatility levels across equity markets. VIX (spot) is currently 21.65, whereas the Russell 2000 Volatility Index (RVX) is 22.33. Next week is also expiry, further heightening volatility levels.  The at-the-money SPX Dec 2025 Straddle is priced 53.05, implying a move of about 2.6 percent between now and next Friday’s expiration. [...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Dec 1, 2015, 12:00 AM

    Hedge Funds and Volatility-Based Strategies Discussion at RMC Asia

    Hedge Funds and Volatility-Based Strategies Discussion at RMC Asia

    The first post-lunch presentation in Hong Kong was actually a hybrid presentation / discussion panel.  Things started off with the Chairman of Eurekahedge, Satoshi Iwanaga from Eurekahedge which created and calculates four indexes to measure the performance of different volatility oriented strategies.  This segmentation is logical since strategies that focus on volatility can vary greatly in their process. The four CBOE Eurekahedge Volatility Indexes are: CBOE Eurekahedge Short Volatility[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Nov 30, 2015, 9:31 PM

    Volatility and the Allegory of the Prisoner's Dilemma

    Volatility and the Allegory of the Prisoner's Dilemma

    Chris Cole from Artemis Capital delivered a presentation with the title, Volatility and the Allegory of the Prisoner’s Dilemma.  In a nutshell the Prisoner’s Dilemma relates to game theory and explores why two rational individuals might not cooperate even if it appears that it is in their best interest to do so. There were three points that Cole wanted to get across during his presentation – Investors are trapped in a Prisoner’s Dilemma Volatility is the only real asset[...]

  • VIX | Trader Talk | Education | Futures | Trade Ideas | Nov 30, 2015, 8:03 PM

    Presentation Discussing the Current Volatility Environment at CBOE RMC Asia

    Presentation Discussing the Current Volatility Environment at CBOE RMC Asia

    Buzz Gregory, Equity Derivatives Strategist at Goldman Sachs, delivered a very informative session on VIX and SPX option trading today in Hong Kong.  His speech hit on a topic that was frequently mentioned at RMC Europe a couple of weeks ago, the current shift in volatility regimes. Highlights of Buzz’s presentation include – It was noted that both SPX and VIX option volumes continue to steadily grow with volume experiencing dramatic increases occurring around market events About[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Nov 30, 2015, 2:28 AM

    Tim Edwards of SPDJI Covers Unique Performance of VIX-Based Benchmark Indices

    Tim Edwards of SPDJI Covers Unique Performance of VIX-Based Benchmark Indices

    At the First Annual CBOE Risk Management Conference (RMC) Asia in Hong Kong, Tim Edwards, Ph. D., Senior Director of Index Investment Strategy, S&P Dow Jones Indices, delivered a presentation on the design and performance of long, short and dynamic VIX-based benchmark indexes, and covered their utility for longer-term investors and shorter-term traders. While many investors are familiar with the price movements of the spot CBOE Volatility Index® (VIX®), we at CBOE receive many[...]

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