cboe

Understanding the VIX in Relation to SPX

Submitted by msebastian on Fri, 06/22/2012 - 4:06pm

One of the first things I teach my options mentoring students, on their way toward a great options education, is to understand how to understand the relative value of VIX.  VIX is not a standalone product; it is a derivative of SPX.  Thus, if one wants to properly read VIX, one must take it in relation to how the SPX is moving.  

For instance, yesterday, I tweeted that based on the lack of movement in the VIX, I think the SPX is primed for a bounce today.  To which I got many a flabbergasted  responses saying "16%" isn’t big?  The answer was no, 16% was not big, not in relation to a 30 point drop in the SPX.  Let’s examine why.  

Trading in Weekly Options Is About to Change, VIX Becoming Ineffective?

Submitted by msebastian on Tue, 05/22/2012 - 5:31pm

Since the listing of weekly options on equities, this blog has lamented the inefficiencies of the current system of trading weekly options.  We have argued that it made little to no sense to list an option that has 8 days of life to it; especial when 2 of which are the weekend.  The set up has led to spreads that are too wide, inconsistent option decay, and strange movements in weekly options.  Well all of that looks like it is about to change.  Under pressure from the CME, the CBOE officially changed how it is going to list SPX Weekly options.

VIX Options a Buy?

Submitted by msebastian on Wed, 05/02/2012 - 4:05pm

I have been a constant bear of just about any volatility product that has existed over the last 6 months, essentially, since the VIX broke through 30 back in November.  And I actually continue to be a bear.  With the market not moving, VIX is a little overpriced, believe it or not.  But that does not mean that I don’t think there aren’t times where call options or VIX straddles might make some sense.  In order to buy VIX options, the following needs to exist collectively:

1.  VIX cash needs to be in relative terms low

2.  VIX futures need to have a low contango relative to VIX cash

3.  VIX options need to have a low IV (VVIX needs to be low)

4.  No great alternative trades

Let’s start with 1 and 2,

A Breakdown of the new OIL VIX Contract

Submitted by msebastian on Mon, 04/09/2012 - 5:13pm

It is our 2 year anniversary at Option Pit!!!  We encourage you to try our services out in the coming weeks, we will be offering the best deals on our products that we will all year, call us (888) Trade-01 to find out more details or email us mark@optionpit.com.  If you are just looking to try us out, you can get a one week trial for only .01!  Go to http://www.optionpit.com/bull

I have to admit, there are very few traders that are as excited as me that the CBOE is relaunching options and futures on GVZ and OVX.  While I like VIX, I think it has some flaws to it that possibly make the product more difficult to use as a hedge:

VIX Option Premium Getting Smoked

Submitted by msebastian on Tue, 08/09/2011 - 12:07pm

The VIX is selling off handily today.  I think it is going to threaten 40 at least until the fed decision come out.

Wealth Lost, Volatility Through the Roof: Buy CBOE

Submitted by msebastian on Mon, 08/08/2011 - 6:52pm

There are going to be about 1000 blog posts about how this is the highest the VIX has been since the flash crash.  There will be even more about how this is the biggest crash since 2008.

How to Tell when Your Cheap Puts are Expensive: The Curve Vol Index

Submitted by msebastian on Thu, 03/24/2011 - 10:01pm

My option mentoring students will tell you when it comes to option trading the two things I probably talk about most are implied volatility and skew.   In fact, I make my trader’s track b

CBOE's C2 Exchange to Trade SPX Options

Submitted by msebastian on Tue, 10/26/2010 - 10:11pm

As an Option Mentor I am always reading up on things to make sure my option mentoring students are up to date with the latest happenings in the trading world.

Are Condors in the Weekly's Worth It?

Submitted by msebastian on Thu, 08/12/2010 - 8:50pm

I have always been a little wary of the trading the weekly options for an income portfolio.  Inherently, I was thinking the risk reward makes no sense.  The argument I always get is that

Syndicate content