Both the Crash of ‘29 and the Crash of ‘87 – two of the worst days in market history – occurred exactly 55 calendar days after the market had made an new all-time high. In other words, 55 days after the top, people are getting anxious. For those who believe in this theory, rather than coincidences, it supposedly has something to do with Fibonacci and/or biorhythms – who knows?
This article was originally published in The Option Strategist Newsletter Volume 9, No. 05 on March 9, 2000.
Two issues ago, we wrote about the effects of changes in implied volatility on a call bull spread. Several readers asked about similar effects on other “common” positions – especially on put spreads – so we’ll expand on that theme this week
This article was originally published in The Option Strategist Newsletter Volume 12, No. 11 on June 12, 2003.
Admittedly, option traders’ “hot” topics may sometimes be pretty boring to the average guy, but this question (above) has been the subject of much discussion amongst all manner of stock market analysts. Recently, the various volatility averages began to rise, even while the broad stock market was rising. This is something that hasn’t happened for a few years, and it also seemed to go against the “conventional” (and I should mention, incorrect) volatility analyses that one is often subjected to when watching financial TV these days. So, just what does this rise in volatility mean, coming as it does during a period of rising prices? That’s what we’ll explore in the feature article in this issue.
This article was originally published in The Option Strategist Newsletter Volume 13, No. 19 on October 15, 2004.
Despite a modest, recent rise in $VIX, the CBOEs Volatility Index remains very subdued – as it has since March of 2003, and especially for most of this year. There are some general relationships between the broad market and $VIX, and there is a good deal of price history to justify those relationships. However, there have been recent articles published in several forums that suggest many traders seem to think it will be different this time – that $VIX isn’t predicting the same sorts of things that have happened in the past. In this article, we’ll explore those suppositions and try to outline some things to look for – from both $VIX and from the broad stock market.
The CBOE recently listed a Condor Index (symbol $CNDR). It is a benchmark index designed to track the performance of a hypothetical option trading strategy that sells a rolling condor spread. The index uses $SPX options, which settle for cash on a monthly basis (“a.m.” settlement). The hypothetical spread is rolled monthly.
This article was originally published in The Option Strategist Newsletter Volume 18, No. 04 on March 5, 2009.
We have been using the hedged strategy between volatility and the broad market for over a year now, and the results have been good. But there’s more to this strategy than meets the eye. So, perhaps it isn’t useful only when $VIX futures are sporting a big premium or discount. It might make sense in a broader array of situations.
This article was originally published in The Option Strategist Newsletter Volume 12, No. 12 on June 25, 2003.
In literally every issue of this publication, we discuss the levels of implied volatilities of various groups of options – stock options, index options, or futures options, for example. Of particular interest, in general, is how stock options are behaving, for they are the backbone of our volatility trading strategies. For example, if stock options are generally cheap, then we want to buy volatility. If they’re expensive, then we look for other strategies that take advantage of their expensiveness. Over all the years, we have not created a measurable index to treat the general level of stock option implied volatility, and that is an oversight that we intend to correct with this issue.
This article was originally published in The Option Strategist Newsletter Volume 19, No. 19 on October 14, 2010.
Each year about this time, we review and recommend a futures spread that has been quite profitable over the years: buying Feb Gasoline futures and selling Feb Heating Oil futures. We call this an intermarket spread since it involves a long position in one market and a short position in a different, but related, market.
This spread has generally been quite reliable in the past, but it can only be implemented in one form – with the actual futures contracts themselves (more about that1 later). We have traded this spread almost every year since 1994, although the entry and exit parameters have been altered a few times.