option trading

Is the OPK squeeze healthy?

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The FOMC released their statement today and the June raise is looking unlikely.  2016 will probably be the year when interest rates get back to normal but for now all stocks could do was muster a .10% move in the big indexes either way.  We are starting to tilt toward good news is good news again but the sub normal rates and stocks are showing the indecision today with VIX trading 2015 lows.

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VXX looks ripe again

Today retraced most of the goldilocks rally in stocks on Friday.  2 days pass and without any real good news (TPP failed in the Senate) stocks had a hard time mustering anything.  Early morning bond selling started things off on the wrong foot too.  The reality is the fear is just not there as the big elephant is rates and the ECB is content to plod along with bond buying until the Greece issue passes.  We only catches glimpse of what will happen when rates start to reset.  For now that is just not happening.

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VIXMO is more VIX


Mark made a great observation yesterday on bond IV being relatively low.  Today we had the 2% move and he was right.  VIX is sitting in an interesting place as we are seeing 1% intraday SPX moves right now on the recent volatility in European bonds.  If today was last year, the VIX future would have closed even with the old VIX cash.


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Blame in on Rio

 As long as one of the big 4 (EU, Japan, USA or China) is still in the QE way stocks are bound to tumble on good economic news.  USA is out, China thinking and Japan and the EU are in full swing.  Today the EU is reaping the benefits of tough fiscal policy and looser monetary policy with growth looking better so stocks sold off.  The strange result of QE is that good news is bad news for stocks and that is the present reality.  To the extent this small selloff lasts will probably be answered by the ADP number in the morning. We will probably bounce on a middling number.

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What happened to the skew?

Today was just a follow through from yesterday.  Bond markets get riled, equities are sold, mess ensues, repeat. When VIX gets into the 12 handle (as it did for a while yesterday) the gravity in volatility is still pulling the IV down.  Today the selling was more pronounced, like someone needed to sell.  Many of the big cap names were slammed, most likely to pay for bond positions that were blowing up.  The short Euro trade must be hurting a lot of folks.  Those folks should want some juice.

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TWTR is probably oversold

The biggest move today was not in the VIX or the SPX.  It was in the German bond market where rates roughly doubled to .2% on the German 10-year.  That is a big move there with traders jumping into the Euro and out of US Treasuries.  Moves like that in the fixed income market tend to dwarf moves in the equity market.  Remember the 2008 crash was a debt fueled crash that plunged us into a near depression.  The 2001 crash was an equity crash that we quickly bounced out of.  It might take awhile for volatility to wind back down so I am going to sit tight on that one for a day or two.

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Will the AMZN rally hold?

AAPL just posted a big number and the stock is up $2 after rallying a couple of dollars today and many dollars for the week.  I guess it is the big number that you have to print that counts.  AMZN posted a giant revenue number last week but so far has been able to avoid accountability for actually ma

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GOOG volatility is too cheap into earnings

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GOOG is about to declare earnings and this is the cheapest I have seen the ATM options in as long as I can remember into a cycle.  The key to GOOG is how it trades through the earnings.  Most of the time the move in a direction will keep going allowing the  ATM the day before earnings to go deep in the  money.

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Learning to love a Cruddy financial Product - VXX

So the Fed came out today with the ball of confusion.   Some want to raise and some do not. That is fair enough and I am starting to feel like the FOMC manages these messages to such a degree that not umbrage can be taken any party.   They want things to be smooth.  Since the Fed has more money than everybody else they will win.

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