option education

Trade of the Year

We are only 3 months in but I think I found the trade of the year.  No doubt the option charlatans out there will talk about this monster winner as the way to make things happen.  Buy out of the money options in potential takeover stocks and walk away with untold riches.  It is easy, right?

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Embrace the SPX schizophrenia

We open this morning with another launch of .5 to .7% depending on where things get to.  I thought last week that 2015 was the year of the Iron Condor in the big indexes because there is lots of daily volatility but not really a follow through in any particular direction. That still looks to be the case. Mostly we have trading ranges that resemble a tempest in a teapot.  The Fed keeping things steady (Mark called that several times over the last few weeks) puts another sword into the volatility.

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NFLX has competition

We have another day like last week where the rally came from nowhere and is most likely not going to go anywhere.  It feels like the algo driven market catches any new piece of news about the FOMC release and it is off to the races.  The last 6 months has been about macro freight trains, collapse of the Euro, oil and commodity  prices with a rocketing dollar.  Greece isn’t even in the headlines anymore.  As day went most stocks were up and VIX softened a bit before the Wednesday’s release.

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SPY skew getting flatter

The IEA came out and said the bounce in oil was only temporary.  That caught a lot of the oil market by surprise as many producers and drillers found new lows today.  Now we are dealing with a short term, could be long term, gut in oil supplies as OPEC puts the squeeze on competitors.  That was enough to foil the bank rally yesterday. The sell-off was half-hearted at best from a volatility point of view.

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So NFP was a big deal!

Surprise, surprise as stocks took a bit of a header today, on get this, a great jobs number.  Yes the number was too good and now interest rates look like they could go up after all.  The Euro and gold responded in kind by plunging to lows of 2015.  Bonds took out some lows for 2015 too. 

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NFP is NBD

 

If January was the month or realized volatility March is turning out to be the dud central for realized volatility.  HV 10 is clocking in around 5% so stocks are barely able to make move from close to close.  The skew is pretty steep keeping VIX higher but for the most part ATM volatility is low.  30 Day IV  is in the 11 handle ATM so there has not been a total collapse but it is getting there.

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Is the oil patch finding a bottom?

This was a strange day in the market when stocks really lacked a sense of direction.  For the most part the tone was down and VIX was up slightly but the volatility futures actually finished down on the day into the close.  There was really a lack of interest more than anything else as the race to NASDAQ 5000 left everyone with an empty feeling.

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The Greek Tragedy turns into a Comedy

See what income generation is all about here

 

It looks like the Greek Drama happening overseas ended up being a comedy more than a tragedy.  That is good for investors and good for the Greeks.  We will revisit the issue in June but for now that looks like the only thing that was holding up implied volatility.

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SPX makes new highs for 2015 and there is still time

 

 The best course for Option Income Trading  Coming Feb 28th 

I don’t know what the rally was from, a pop in oil, AAPL to the moon or a de-escalation in the Ukraine but a rally we had.  Stocks fallen into a pattern of rally and retreat and today was no different.  The last downturn was a mix of Greek elections and 10% of the market cap of the SPX going into the ash can with oil.  Tech is leading now and the market loves tech leadership.  NDX 5000, a sop to swinging 90’s is now a realistic target.

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