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YHOO BABA Earnings Swap

Tomorrow morning Alibaba reports earnings.  The market is expecting big things because the IV is exploding.  What is interesting is that the IV in Yahoo options is not.  Currently  BABA accounts for about 85% of YHOO's market value.  Thus a pop in BABA options should produce a pop in YHOO options.  But take a look at the two IV charts compared:

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SPX 2017 and All Is Well??

Anytime the market hits an all time high I typically expect to see either a near low term or at least close a near term low.  This is not the case with the SPX and the VIX right.  SPX is at an all time high but the VIX is about 2.5 points higher than it was the last time we got up here.

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livevolX (r) www.livevol.com

The Trade:

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Loved Stock Trade in FB

I have been discussing what I call the 'LOVED STOCK' earnings chart over the last few days.  This is a pattern where an AMZN, NFLX, or FB rallies in anticpation of earnings.  The stock then gets sold out of earnings as it disappoints traders.  Finally, within a couple of days of the sell off the stock begins to rally again earasing some of the losses from earnings.  The only stocks that are 'loved' that did not show this pattern so far is TWTR.

With FB appearing to create this pattern and FB IV in the dump (See chart)

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Graphic Evidence of UVXY Crudiness

Over the last 3 months both VIX and VXX are actually up (albeit slightly for both).  You know what is not up on the year,  UVXY and TVIX.  The combo of levering and contango make the product pretty great in a market where the VIX is exploding (see mid October)  but pretty awful the rest of the time

Chart - UVXY - ProShares Ultra VIX Short-Term Futures ETF_window_screenshot.png

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Next Week's ATM Straddle is Too Cheap..AGAIN

Last Friday we wrote how the SPX ATM straddle was pricing in a level of around 34 bucks a spread,  this after the SPX had just ripped up 70 points or so.  At the time VIX was around 16.  Since then the market has ripped up higher a little over 35 points.  The straddle is worth close to 40.00 a spread.  Today, the VIX is down to below 14.50 after moving 35 points in 3 days.  With 8 full trading days to go, the SPX straddle expiring next week is pricing in under 33.50 dollars a spread.

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Risk takes the Weekend off

Using Options to Trade for Direction

The Best Course for Directional Option Trading

“Learn how to put the odds of trading on your side, learn to profit from options even when you are wrong, and especially when you are right!”

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