ryanbrennan's blog

By Lawrence G. McMillan

The CBOE is introducing two new variations on volatility products.  The first is that there will be weekly $SPX options expiring on Wednesdays (“Wednesday weeklys” is what the CBOE is calling them).  Recall that $SPX options are the foundation for the $VIX calculation.  $VIX futures and options expire on Wednesdays, and now that there are weekly $VIX futures and options, these Wednesday $VIX expirations extend out several weeks.

By Lawrence G. McMillan

The current year started off in a very similar manner to 2008, with the market dropping sharply through the Martin Luther King holiday.  The year 2008 surely conjures up some unpleasant memories for most investors and traders (unless you happened to be short at the time – or long volatility calls, as this newsletter was).  In this article, we’ll look at similarities in price action as well as the Volatility Index ($VIX) between 2008 and 2016.

By Lawrence G. McMillan

Stocks continue to have trouble rallying, but at least support has shown up in the 1870 area of $SPX. If that level is broken on a closing basis, it would mark the end of any short-term rally attempts.

Even though both equity-only put-call ratios are on sell signals and pressing against new highs, they are in deeply oversold territory.

Market breadth has improved this week. As a result, both breadth oscillators are now on buy signals.

By Lawrence G. McMillan

A “modified Bollinger Band” (mBB) buy signal is nearly upon us.  It almost occurred today (Thursday, January 13th), but missed by a couple of points.  We began to wonder how past sharp market declines lined up with the eventual mBB buy signal.  Was the first signal successful, or did it take a number of probes before the market eventually bottomed.  Was the mBB buy signal the bottom of the market, or did it continue on downward at a later time?

By Lawrence G. McMillan

The market has finally stabilized to some extent.  Even though $SPX had wide swings in the past week, there was a net gain over the past five trading days.

There is strong support at 1820 (see Figure 1), because that is where this January's decline halted, and where the declines of April and October 2014 also halted.   A breach of that area would be quite negative.

By Lawrence G. McMillan

Composite Implied Volatility (CIV) – for an individual stock – is calculated by weighting the individual implied volatilities of each option that traded on that stocks, by volume trading and by distance in- or out-of-the-money (at-the-money gets the most weight).  We calculate this daily and store it in a database.  Later, then, it is a simple matter to determine the percentile of the stock’s CIV by comparing the most recent reading to the past 600 (or whatever) readings.  

By Lawrence G. McMillan

Stocks remain under extreme pressure, but it finally looks like the oversold conditions are starting to have some effect. An oversold rally is now underway.

By Lawrence G. McMillan

The fall in the price of $SPX has continued, adding to the worst start of any year -- ever. As a result, there are severe oversold conditions, and buy signals are pending on many fronts. But few buy signals have been confirmed, and markets can continue to decline precipitously while they are oversold.

By Lawrence G. McMillan

Recently, the CBOE’s Volatility Index ($VXST) closed above all three of the other CBOE Volatility Indices.   At the time, it struck me as being a rather rare occurrence, and it seemed there might be some considerations as to forthcoming market movement.  Consequently, a rather extensive study was performed, and indeed a trading system did emerge, as this article will reveal.