fbpx Volatility | Option Strategist

Volatility

Weekly Stock Market Commentary 10/11/2019

By Lawrence G. McMillan

Violent market movements have followed nearly every piece There are both bearish and bullish signals in place, although the bears are being put to the test today.

Monday's Strange $VIX9D Behavior Explained

By Lawrence G. McMillan

It turns out that the strange behavior in $VIX9D on Monday, when it was down –4.85 while $VIX and other CBOE Volatility Indices, as well as $SPX, were relatively unchanged was due to a computer malfunction at the CBOE. Yesterday morning, when the market was still rather stable, $VIX9D was up almost 4 points, with $VIX again relatively unchanged; the computer error had been corrected. I don’t know if there well be an updating of the Monday prices for $VIX9D, but probably not. So, anyone using $VIX9D as an indicator or as part of a trading system should be aware that Monday’s prices were erroneous...

A Large $VIX9D Drop Yesterday

By Lawrence G. McMillan

Yesterday, the 9-day Vol Index dropped from 14.68 to 9.83!  This was not some arithmetic quirk with expiring options or a holiday or anything like that.  This was a true drop in the price of near-term $SPX options. $VIX9D is based on the Sept 27th and Oct 4th expirations. $SPX was essentially unchanged yesterday (down 23 cents).  Here is what happened to the at-the-money put – the 2990 strike:

Leveraging Volatility - My Best Strategy for Today's Market

By Lawrence G. McMillan

I’ve just finished putting together a free Special Market Report with some of my fellow traders and investors. Inside, it’s loaded with 19 detailed strategy guides explaining our favorite techniques for leveraging today’s highly volatile markets, including my chapter on Trading the $VIX Futures Term Structure.

Trading the $VIX Futures Term Structure (Preview)

By Lawrence G. McMillan

The CBOE introduced the Volatility Index ($VIX) in 1993. The calculation of $VIX has changed a couple of times over the years, and due to the complexity of those calculations, $VIX itself cannot be traded.  However, in 2004, $VIX futures were listed, and in 2006, $VIX options were listed.  $VIX futures are the underlying instrument for all of the Volatility ETN’s and ETF’s that exist today (VXX, for example).

Weekly Stock Market Commentary 8/16/2019

By Lawrence G. McMillan

Stocks are still in a negative mode, despite the presence of some very strong rally days emanating from oversold conditions.

The 2940-2950 area represents resistance for several reasons. Meanwhile, there is support at 2825, where $SPX has bottomed on three separate days recently. Below there, the support at 2720-2730 is more identifiable, for that's where $SPX bottomed out in both March and May.

Equity-only put-call ratios continue to rise, thus remaining on sell signals.

Is an Increase in Realized Volatility a Bearish Warning? (Preview)

By Lawrence G. McMillan

In our market commentary for the past few weeks, we have occasionally mentioned the fact that realized volatility (the 20-day historical volatility, say) of $SPX was very low and that a sharp increase in that volatility measure would not be good for stocks. This is somewhat akin to how we view implied volatility ($VIX) in that we are not too concerned when it is low, but do become cautious when it starts to rise. The difference in the two is that realized volatility is backward-looking, while implied volatility is forward-looking. On the surface, one might think that forward-lookingwould be better, except that we don’t know who’s doing the looking. Sometimes, $VIX seems to get distorted, so perhaps there are times when realized volatility could be a better measure.

THE BASICS: Review and Explanation of Concepts: Implied Volatility (05:09)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 5, No. 9 on May 9, 1996. 

The concept of volatility, and especially implied volatility is extremely important for option traders. We often refer to implied volatility, for it is the foundation of many of our strategies. However, when meeting the public, I find that many people don't have a clear concept of what implied volatility is, so this article will be educational for some readers, and merely review for others.

Weekly Stock Market Commentary 8/2/2019

By Lawrence G. McMillan

Everyone was worried about the FOMC announcement this week, but it turned out to be benign. But, on Thursday President Trump tweeted that there would be more Chinese tariffs. Whether the market over-reacted to this tweet or whether there were just a lot of traders looking to lighten up, a torrent of selling was unleashed.

Weekly Stock Market Commentary 6/28/2019

By Lawrence G. McMillan

$SPX pulled back this week, partly because the market was overbought and also because the week after June expiration is a seasonally weak week. So far, it's just a normal pullback, with support at 2890-2900.

Equity-only put-call ratios remain strongly on buy signals. Their downward trajectory was not even fazed this week, as they held steady to their buy signals even while $SPX corrected a bit.

Pages

Option Strategist
Blog Search

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.

-->