• VIX | Trader Talk | Trade Ideas | May 7, 2017, 7:24 PM

    Weekend Review of Russell 2000 Options and Volatility - 5/1/2017 - 5/5/2017

    Weekend Review of Russell 2000 Options and Volatility - 5/1/2017 - 5/5/2017

    Large cap stocks widened the performance spread with small cap stocks with the Russell 1000 (RUI) gaining and the Russell 2000 (RUT) dropping a bit last week.  For the year, RUI is up 7.13% while RUT is up 2.94%. VIX dropped last week, but the CBOE Russell 2000 Volatility Index (RVX) was higher.  Admittedly, RVX was up only 0.02 but when combined with the VIX drop of 0.25 the result is a slight widening of the spread between RVX and VIX.  One trader put on a position late Friday[...]

  • VIX | Trader Talk | Trade Ideas | May 7, 2017, 7:21 PM

    Weekend Review of Volatility Indexes and ETPs - 5/1/2017 - 5/5/2017

    Weekend Review of Volatility Indexes and ETPs - 5/1/2017 - 5/5/2017

    The chart below may be one of the final references to the French Election which came to an end this weekend.  Note VXST, which reflects the IV of very short term SPX options was elevated going into the weekend.  I don’t think it is too much of a stretch to say that a quick drop in VXST may be in the cards come Monday morning.  SKEW dropping dramatically last week may be the last bastion of higher volatility dropping.  This happened despite VIX dropping which makes the[...]

  • VIX | Trader Talk | Trade Ideas | May 6, 2017, 9:57 AM

    Weekend Review of VIX Futures and Options - 5/1/2017 - 5/5/2017

    Weekend Review of VIX Futures and Options - 5/1/2017 - 5/5/2017

    VIX managed to (briefly) put in a post Great Financial Crisis low hitting 9.90 on Monday and sneaking in a 9.99 low on Friday as well.  Full disclosure, I didn’t even see the 9.99 print on Friday, but then again, we are getting conditioned against getting too excited when VIX dips below 10.  Worth noting below is the bigger drop in the May future when compared to spot VIX.  Typically, we see this closer to expiration, but when there’s very little on the horizon that the[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Apr 30, 2017, 9:10 AM

    Weekend Review of Volatility Indexes and ETPs - 4/24/2017 - 4/28/2017

    Weekend Review of Volatility Indexes and ETPs - 4/24/2017 - 4/28/2017

    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[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Apr 29, 2017, 1:43 PM

    Weekend Review of Russell 2000 Options and Volatility - 4/24/2017 - 4/28/2017

    Weekend Review of Russell 2000 Options and Volatility - 4/24/2017 - 4/28/2017

    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[...]

  • VIX | Trader Talk | Trade Ideas | Apr 29, 2017, 9:27 AM

    Outcome: Net Fun

    Outcome:  Net Fun

    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,[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Apr 29, 2017, 9:00 AM

    Weekend Review of VIX Futures and Options - 4/24/2017 - 4/28/2017

    Weekend Review of VIX Futures and Options - 4/24/2017 - 4/28/2017

    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[...]

  • Trader Talk | Strategy | Trade Ideas | Apr 25, 2017, 9:23 AM

    Reviewing a SPX Option Day Trade from Monday

    Reviewing a SPX Option Day Trade from Monday

    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. [...]

  • VIX | Trader Talk | Trade Ideas | Apr 21, 2017, 9:51 AM

    Short Some Shares and Call Me in the Morning

    Short Some Shares and Call Me in the Morning

    Who wants to buy high and sell low?  Why would anyone buy calls before the closing bell and sell them to someone for half price the next morning when the opening bell rings?  When would anyone feel okay about buying for 88 cents and then selling for 45?  Answer: When the calls are just a wrapper, a box designed to keep something else safe while in transit, like a shoe box protects the merchandise on the delivery truck so that your purchase isn't thrown on the porch one shoe at a time[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Apr 9, 2017, 10:32 AM

    Weekend Review of Russell 2000 Options and Volatility - 4/3/2017 - 4/7/2017

    Weekend Review  of Russell 2000 Options and Volatility - 4/3/2017 - 4/7/2017

    An emerging theme in 2017 is that when stocks come under pressure the Russell 2000 (RUT) seems to take it on the chin a bit more than the Russell 1000 (RUI).  Last week the large cap focused RUI was lower by 0.33% while RUT lost just over 1.5%.  This widens the lead that RUI has on RUT to about 4.5% for 2017.  With small caps leading stocks lower the relative level of small cap volatility remains high compared to large cap volatility.  The best way to measure this is the CBOE[...]

  • Market News | VIX | Trader Talk | Trade Ideas | Apr 9, 2017, 10:29 AM

    Weekend Review of Volatility Indexes and ETPs - 4/3/2017 - 4/7/2017

    Weekend Review of Volatility Indexes and ETPs - 4/3/2017 - 4/7/2017

    When there is not a whole lot going on to impact the financial markets we can get fixated on different topics.  Maybe that is what is going on with me and the French Election process.  The steep difference between VXST and VIX on the chart below may reflect the time frame being measured by VXST being just short of the pending rise in implied volatility that is expected in front of round one of the election in a couple of weeks.  It will be interesting to see if we get a relative rise[...]

  • VIX | Trader Talk | Trade Ideas | French Election | Apr 8, 2017, 1:05 PM

    Weekend Review of VIX Options and Futures - 4/3/2017 - 4/7/2017

    Weekend Review of VIX Options and Futures - 4/3/2017 - 4/7/2017

    The S&P 500 lost about 0.3% last week and VIX rose.  I think the VIX to S&P 500 relationship is only part of the story related to VIX rising last week.  It appears the pending election process in France is starting to influence US volatility.  Note that April is a bit higher than May volatility in the orange circle on the chart below.  This is a fairly rare occurrence for the futures considering the current low level of VIX.  As long as there is a cloud of uncertainty[...]

  • VIX | Trader Talk | Trade Ideas | French Election | Apr 4, 2017, 3:11 PM

    VIX, VSTOXX, and the French Election

    VIX, VSTOXX, and the French Election

    About a year ago, we were all starting to focus on the Brexit referendum which we ‘knew’ wasn’t going to pass.  There were several lessons from the Brexit experience with the top one being do not discount an election until all the votes are counted.  This played out again in November, but that’s not what this blog is about.  This blog is about how VSTOXX and VIX are behaving in front of the pending French election process.  First, going back to June 2016[...]

  • Weekend Review of VIX Futures and Options - 3/27 - 3/31

    Weekend Review of VIX Futures and Options - 3/27 - 3/31

    The Friday to Friday change in the VIX term structure was as orderly as I’ve seen it in some time.  VIX has had a lower average daily close during a quarter only once, the fourth quarter of 2006.  However, the low to high range for VIX has never been tighter than what we experienced in the first quarter of 2017 with the range of 2.54.  On average the range of closing VIX prices is about 10.60 so the VIX market may be a bit wound up to the point where a big move to the upside[...]

  • Market News | Trader Talk | Trade Ideas | Apr 2, 2017, 10:42 AM

    Weekend Review of Russell 2000 Options and Volatility - 3/27 - 3/30

    Weekend Review of Russell 2000 Options and Volatility - 3/27 - 3/30

    The first quarter of the 2017 performance race between the Russell 1000 (RUI) and Russell 2000 (RUT) came to close with large caps up 5.51% and the small cap focused RUT up 2.12%.  The consensus feeling is that RUT got a little too far ahead of RUI from election day through the end of 2016 and RUI was due for a bit of catching up.  The small cap versus large cap risk index is a good way to explain the chart below.  Small cap expected volatility is best represented by the CBOE Russell[...]