These are two Exchange Traded Notes (ETN’s) that attempt to hedge a long “stock market” portfolio by using a long volatility component. We have written about VQT before (Volume 21, No. 4), and I often talk about it in my seminars and webinars that discuss volatility trading.
The feature article is brief this time, but it is pertinent in that a potential buy signal has just set up in the Total put-call ratio – or has it? It doesn’t completely fit the parameters that we have laid out for such buy signals, but perhaps “close enough” is sufficient. The article discusses whether it is or not.
We have very well-defined criteria for determining a major Total put-call ratio buy signal. These are powerful signals, worth a 100-point rise or more in $SPX. There have been twenty such signals since the year 2000, of which 11 have produced the desired 100-point gain, and three others produced smaller gains. The total $SPX points gained from the twenty signals is +960. So, these signals are not to be taken lightly.
We have taken a new (or have returned to an old) approach for earnings-related straddle buying recently, and that is the subject of the feature article. The article also summarizes other approaches to the strategy. On page 3 is this week’s recommendation – in KMX.
Everyone is aware of the fact that stocks gap sharply on certain news events – primarily earnings reports and, for biotechs, FDA-related news. Other events, such as lawsuit verdicts or settlements, can cause gap moves, too. Option traders are aware of the potential of these events, especially when the timing of the event can be determined with some certainty.
The U.S. Dollar has been getting a lot of press lately as it has nearly gone parabolic with a huge rally on top of an already long-term rally. Optimism is rampant, and bears are cowed. This is likely a good time to lay out a plan for a trade on the short side.
When the U.S Dollar moves, it often affects the price of many other things, especially commodities. Of course, other currencies move in the opposite direction to the dollar, since we – as U.S. citizens – tend to view everything in dollar terms.
We usually try to run an article on this subject at least once during tax season. I realize that not everyone is aware of the rules governing Section 1256 contracts. Hence, since tax season is upon us, I thought this review might be of benefit to some of our subscribers – and to options and futures traders, in general.
Ivers Riley, a long-term friend and business associate, died February 17th at his home in Savannah, Georgia. I met Ivers in the early 1980's when he was a cofounder of The Options Group – a consulting firm specializing in all the “new” forms of options that existed at that time (currency options and index futures, primarily, as I recall).
When we first wrote about the “$VIX Crossover” system, we only analyzed it from the viewpoint of buy signals. In the feature article in this issue, there is an update and review of the “buy” portion of the system. Then there is also an analysis of the reverse part of the system – the “sell” signal. Also, the $VXST Crossover system is reviewed.
