call spread

Trading TSLA Ahead of Elon Musk

Elon Musk put out a tweet today explaining that he is going to have a big announcement next week.  I was asked to discuss this potential announcement on Bloomberg.  Here is the Video:

 

My basic point is that IV on TSLA options really hasn't moved very much, and in fact, was slightly down on the day.  We can see April and May vol sold off today, despite the uptick in volume.

Big Paper points to a bottom in the miners

As I sit around this Friday waiting for some news to come out of Europe to move my volatility positions I can’t help but think how many people even know where Cyprus is?  A country with less than 1 million people in the middle of Mediterranean Sea can move the US Treasury market.  That is the state of our global economy.  It is the latest in the saga of European Debt soap opera now entering its 4th season.  So when the broader market picture gets murky I like looking at other names that have something going on in them.  Here is an Option Vision snapshot of EGO.

 

Buy the rumor and sell the news, well not always....

 i don’t quite know what happened between last Monday and today but someone with a big bottle of happy pills was doling them out like candy from a Pez dispenser.  The Sequester is no problem, Italy has no choice but to follow the path, Draghi won’t lower rates and Uncle Ben won’t raise them and just like that the Dow is at an all-time high.  I am of the mind that the equity markets have had mostly lower valuations for a while based on the fact that the economy cannot grow.  There were 0 returns in 2011 and a nice return for 2012 but averaged out it was not that much.  2013 is giving things a kick but stocks are at nothing like crazy valuations.  The big question is can growth ha

The AAPL Skew Gets a Bit More Inverted

Something that has been missing for a few years is finally starting to come back into the market.  That something is buyers.  Option volumes had a rough year in 2012 as most retail investors sat out and watched the politicians and governments pitch fits at each other.  The last bull cycle in the 1990s was built on stability coming off of the Savings and Loan Crisis.  Remember that?  The problems from 2008 and starting to recede from the front of the financial pages but the public is only starting to think beyond it.  It would be hard to say stability is back but it does feel better. I want to look at Friday’s rally in AAPL.

VVIX Had a Nice End of Day Pop

While the VIX may not have exploded with the markets meltdown, we did see something interesting at the end of day in the vol of December options.  Take a look at the pop we saw in December options around 3:40 with the VIX pop as well.

 vix_1.png

Livevol (r) www.livevol.com

Notice that, over the last 2 days, we have seen the VIX have pops, but the IV of the options hasn't moved.  It's interesting that this VIX pop,  which was AFTER the fed announcement, is what got VVIX to move.

Where was the movement:

Playing VIX Term Structure

Over the years, I have made the argument repeatedly that I think SPX puts do a better job of hedging than VIX calls, especially in low VIX environments.  However, like all trades and hedges, that is not a rule but a generality.  There is something strange going on in VIX that is making going long call spreads in VIX very favorable.  Take a look at VIX term structure:

vix_0.jpg

www.vixcentral.com

Unusual Activity in RIMM

Besides a slight scare from the Speaker of the House today, the market rallied in fine style.  It could not break out over 1422 on the SPX but most of the market did well.  Volatility did come down a touch too as the short end of the market started to catch up with what the longer end of the volatility market has been doing.  It looks like we are setting up for a rally to the end of the year as long as some sort of something comes out of Washington.  We would have a nice Hollywood moment if the politicians got it together before Christmas.  Wishful thinking anyway and I won’t bet too heavily on it.

Long Term Risk Coming In?

This morning we had another continuation of the Cliff Dwellers saga.  This is where the market participants watch and see what the Executive Branch and Congress are going to say and then hit the sell button.  It played out it in great fashion this morning on the leftovers from the hardening position talk on both sides in our esteemed government.  Note the brisk selloff in the SPY this am.  The SPY touched 139 and then proceeded to rally 1.7%+ to close 141.54.  What happened?

 

Chart by ThinkorSwim   (www.thinkorswim.com)

AAPL IV Now Higher than Earnings and Product Launch

Many of my option mentoring students LOVE AAPL.  AAPL might be heading for some real problems here in the near term.  If not problems, at least some serious volatility.  How can I tell?  While some traders will point toward the stock breaking its 50 day and 100 day moving averages,  I would point toward something else,  volatility.  Since AAPL stopped whipping around in the spring and bottoming out in May, the stock has had two major characteristics:

1.  The stock has almost moved in a straight line higher

2.  The Option Volatility has been relatively low

Today,  the Option IV officially broke the high since AAPL took off in mid May:

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