The pressure on the stock market increased again this week, driving the Standard & Poors 500 Index ($SPX) down through some support levels, and generally turning almost all of our indicators to sell signals.
The next support level for $SPX -- at 1600 -- is the extremely important one, and that held today. There is now resistance at 1625-1635.
Equity-only put-call ratios are strongly on sell signals. They are now trending upwards, which is bearish for the market.
Variance futures are attractive to institutions, but apparently for individuals: not so much. The CBOE Futures Exchange (CFE) delisted its variance futures contracts (on $SPX) a few months ago. They are supposedly working on a new contract in a somewhat different format.
Meanwhile, the CME has announced its intention to introduce variance futures on a wide array of 9 different futures markets. The following table summarizes these new listings:
The new mini options began trading on March 18th. We held off writing about them for a little while so that we could see how volume and open interest were trending. A mini option is for 10 shares of the underlying stock or ETF, rather than 100 shares as is the case with “regular” options. So far, there are mini-options only on five stocks: Amazon (AMZN), Apple (AAPL), Google (GOOG), Gold ETF (GLD), and S&P 500 SPRDs (SPY).
As traders and investors express more of an appetite for derivative products, the research departments at the exchanges (primarily the CBOE) and at various creators of ETFs (Proshares, First Trust, Rydex, etc.) have been busily designing new products. In this article, we're going to look at a few that have recently been announced. There are probably many more, but these are receiving a certain amount of new publicity at this time.
The fifth edition of the best-selling book, Options As A Strategic Investment was released today, August 7th. An updated version of the Study Guide has also been released. The first edition was released in late 1979 with a 1980 copyright. Further editions followed in 1986, 1993, and 2002. Hence, it has been ten years since the last update.
On May 23rd, the CBOE will be listing futures on the Nasdaq-100 Volatility Index with the symbol /VN. The Nasdaq VIX futures will be similar to the regular S&P $VIX futures in that they will be "based on the real-time prices of options on the Nasdaq-100 Index," will have a multiplier of $1,000, will trade from 8:30 am - 3:15 pm Chicago Time, and have the same settlement date as the /VX futures ("The Wednesday that is 30 days prior to the third Friday of the calendar month immediately following the month in which the contract expires ").
The CBOE Futures Exchange (CFE) has launched a new volatility futures contract – this time on the Emerging Markets ETF (EEM). The volatility index (i.e., the EEM VIX) is calculated from EEM options and is listed under the symbol $VXEEM. The futures on that index trade with a base symbol of VXEM. Currently there are March, April and May futures trading. If you’ll recall, after the initial $VIX futures were listed on the CFE, the only other futures to be listed were those on the Gold ETF (GLD).
Options for Volatile Markets: Managing Volatility and Protecting Against Catastrophic Risk, the follow up to Richard Lehman and Lawrence G. McMillan's New Insights on Covered Call Writing, is finally available on our website. Considering the current market conditions, the timing couldn't be more appropriate.
Weekly put option sales have been added to the analyses in The Strategy Zone (SZ) and in the Option Work Bench (OWB).
Subscribers to The Daily Strategist that follow our weekly SPY sales, are up +18% in five months, in the ongoing position that we are running in that newsletter.