Trade Ideas Archives - Cboe Blogs

  • Market News | Strategy | Trade Ideas | Sep 24, 2015, 10:30 AM

    Earnings Week of 9/28 - 10/2

    Earnings Week of 9/28 - 10/2

    The calendar is light again as we move into early October next week.  Enjoy the silence because the following week we start to see the beginnings of third quarter earnings.  The numbers below represent historical stock price reactions in response to earnings reports for the last three years.

  • Strategy | Trade Ideas | Sep 23, 2015, 2:46 PM

    Trade Idea in SPX: Broken Wing Iron Butterfly

    Trade Idea in SPX: Broken Wing Iron Butterfly

    Define Broken Wing  Iron Butterfly:  call credit spread plus put credit spread with either the put side or call side narrower than the other one. Dan’s example of a Broken Wing  Iron Butterfly: I am going out in duration about 23 days in SPX using the October expiration. I am selling the call credit spread with the width 30 wide and the put credit spread with the width 40 wide. This gives less risk on the upside and more risk on the downside. Both credit spreads are selling the[...]

  • Market News | Trader Talk | Trade Ideas | Sep 21, 2015, 12:40 AM

    Earnings Next Week - 9/21 - 9/24

    Earnings Next Week - 9/21 - 9/24

    We are still in a pretty light period as far as earnings announcements go.  Things don't kick off until Thursday with ACN in the morning and NKE and BBBY in the afternoon.  As always the numbers below depict the last three year's worth of stock price reactions to earnings announcements.

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 19, 2015, 12:00 PM

    The Week in VIX - 9/14 - 9/18

    The Week in VIX - 9/14 - 9/18

    VIX was slightly lower despite the S&P 500 dropping a little last week.  I would not read anything into this slight market anomaly(both SPX and VIX dropping last week).  VIX actually showed the type of behavior we are accustomed to with equity implied volatility leading up to and after an earnings report.  Just think of the FOMC announcement as a kind of earnings announcement for the equity markets. The September contract settled Wednesday last week and now October is the front[...]

  • VIX | Trader Talk | Trade Ideas | Sep 16, 2015, 9:24 AM

    I Don't Usually Trade Long Options...But When I Do

    I Don't Usually Trade Long Options...But When I Do

    Who buys calls?  Who buys puts?  I often wonder this, as I am usually the one selling them to others.  Do buyers really think they're going to profit from them?  Is a real person buying them?  Is it a bank, or a "market maker" (they are people, right?  I admit I'm confused about those mythical creatures.) Anyway, it's a rare happenstance that I think a call or put is worth buying.  One thing that makes an option attractive to me is its structure of being[...]

  • VIX | Trader Talk | Education | Trade Ideas | Sep 13, 2015, 2:06 PM

    The Week in Russell 2000 Trading - 9/8 - 9/11

    The Week in Russell 2000 Trading - 9/8 - 9/11

    Small and large cap stocks moved higher in sync last week with both the Russell 1000 (RUI) and Russell 2000 (RUT) gaining about 2%.  Both are still lower for the year with RUI down 4.32% and RUT down 3.89%. On the volatility front VIX finished the week at about a 5% discount to the CBOE Russell 2000 Volatility Index (RVX).  Historically RVX is usually at about a 20% premium to VIX, however, in times of global crisis or higher levels of volatility the two tend to converge.  The recent[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 13, 2015, 9:59 AM

    The Week in VIX - 9/8 - 9/11

    The Week in VIX - 9/8 - 9/11

    VIX dropped last week, which it tends to do when the S&P 500 is up 2%, but the futures curve remains in a state of backwardation.  The continued backwardation honestly surprises me when the risk everyone is talking about comes after September contracts settle on the open Wednesday of this week.  It may just be that there is more to be worried about than the pending Fed announcement. The weekly VIX curve shifted lower as well.  Having five consecutive weekly VIX futures expirations[...]

  • Market News | VIX | Trader Talk | Futures | Trade Ideas | Sep 12, 2015, 10:43 AM

    The Week in Volatility Indexes and ETPs - 9/8 - 9/12

    The Week in Volatility Indexes and ETPs - 9/8 - 9/12

    The VXST – VIX  - VXV – VXMT curve shifted dramatically to the downside last week in response to the S&P 500 recovering about 2% of recent losses.  The highlight here for me is that VXST is still at a premium to VIX, although the difference is very slight.  All eyes are on the Fed this coming week.  I’m going to attribute this short term volatility premium to the market preparing for the known unknown of how the financial markets will react to the Fed statement. As[...]

  • Market News | Trader Talk | Strategy | Trade Ideas | Sep 9, 2015, 3:05 PM

    Trader Taking Advantage of SPX Weeklys and Extended Trading Hours

    Trader Taking Advantage of SPX Weeklys and Extended Trading Hours

    Once a week I like to report about a block trade in this space.  This week I’m going to discuss a trade, but it does not qualify as a block trade.  In fact it is a one lot.  However, this trade is pretty interesting as it takes advantage of two recent developments in the option markets - Weeklys and Extended Trading Hours. I have neighbor who is a pretty frequent trader in the SPX option and S&P futures market.  We’ll call him Larry to protect his identity. [...]

  • 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 | 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. [...]

  • 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 | 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 | 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[...]